As filed with the Securities and Exchange Commission on July 28, 1998
Registration No. 333-56851
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO THE
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SUMMIT BANCORP, INC.
SAVINGS BANK EMPLOYEES RETIREMENT ASSOCIATION 401(K) PLAN
AS ADOPTED BY SUMMIT BANK
(Exact name of registrant as specified in its charter)
Massachusetts 6712 (To be applied for)
(State or other jurisdiction of (Primary standard (I.R.S. Employer
incorporation or organization) industrial classification) identification number)
81 Main Street
Medway, Massachusetts 02053
(508) 533-3100
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
Eugene G. Stone
President and Chief Executive Officer
81 Main Street
Medway, Massachusetts 02053
(508) 533-3100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Robert B. Pomerenk, Esq.
Eric Luse, Esq.
Luse Lehman Gorman Pomerenk & Schick
5335 Wisconsin Avenue, N.W.
Suite 400
Washington, D.C. 20015
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933,
check the following box: |X|
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. |_|
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================================
Proposed Proposed maximum
Title of each class of Amount to be maximum offering aggregate Amount of
securities to be registered registered price per share offering price (1) registration fee
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share 1,243,150 shares $10.00 12,431,500 $3,668(2)
- ----------------------------------------------------------------------------------------------------------------
Participation Interests(3) 65,000 interests -- -- --
================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) A fee of $3,512 was paid with the registrant's original filing; a fee of
$156.00 is being submitted herewith to register an additional 52,900 shares
at an offering price of $10.00 per share, for an additional aggregate
offering price of $529,000.
(3) The securities of Service Bancorp, Inc. to be purchased by the Savings Bank
Employees Retirement Association 401(k) Plan as adopted by Summit Bank are
included in the amount shown for Common Stock. Accordingly, pursuant to
Rule 457(h) of the Securities Act of 1933, as amended, no separate fee is
required for the participation interests. Pursuant to such rule, the amount
being registered has been calculated on the basis of the number of shares
of Common Stock that may be purchased with the current assets of such Plan.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until the registration statement shall become effective on such
date as the Securities and Exchange Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
Prospectus Supplement
SERVICE BANCORP, INC.
SUMMIT BANK
401(k) PLAN
This Prospectus Supplement is being provided to participants (the
"Participants") in the SBERA 401(k) Plan as adopted by Summit Bank (the "Plan").
Summit Bank (the "Bank") is reorganizing from the mutual holding company form of
organization to the two-tier holding company form, by establishing Service
Bancorp, Inc., a Massachusetts subsidiary holding company (the "Company") which
will become the holding company of the Bank, and shares of Common Stock of the
Company will be issued to certain depositors and the public (the "Offering"). As
a Participant, you may direct the trustee of the Plan to purchase Common Stock
in the Offering with amounts allocated to your account under the Plan. The Plan
would invest in Common Stock through the Service Bancorp, Inc. Stock Fund
("Employer Stock Fund"). Since the Plan actually purchases the Common Stock, you
would acquire only a "participation interest" in the shares and would not own
the shares directly. This Prospectus Supplement relates to your initial election
to direct that all or a portion of your account be invested in the Employer
Stock Fund in the Offering. Your account will be reinvested in the other funds
available under the Plan as directed by you in the event that the Offering is
oversubscribed and the total amount allocated to your account cannot be used by
the trustee to purchase Common Stock. You will also be entitled to direct the
investment of your account in the Employer Stock Fund after the Offering is
completed.
The Prospectus of the Company dated August __, 1998 (the "Prospectus")
which is attached to this Prospectus Supplement includes detailed information
with respect to the reorganization and related Offering, and the financial
condition, results of operations and business of the Bank. This Prospectus
Supplement, which provides information with respect to the Plan, should be read
only in conjunction with the Prospectus. Defined terms have the same meaning as
is set forth in the Prospectus. For a discussion of certain factors that should
be considered by each Participant as to an investment in the Common Stock, see
"Risk Factors" beginning on page __ of the Prospectus.
The interests in the Plan and the offering of the Common Stock have NOT
been approved or disapproved by:
o the Federal Deposit Insurance Corporation,
o the Securities and Exchange Commission,
o the Division of Banks of the Commonwealth of Massachusetts,
o the Board of Governors of the Federal Reserve System, or
o any other federal or state agency.
No office, corporation, commission, bureau or other agency has passed
upon the accuracy or adequacy of this Prospectus Supplement. Any representation
to the contrary is a criminal offense.
The participation interests offered hereby are NOT (1) savings accounts
or deposits; (2) federally insured or guaranteed, or (3) guaranteed by the
Company or the Bank. The Plan's entire investment in Common Stock is subject to
loss.
The date of this Prospectus Supplement is August __, 1998.
<PAGE>
TABLE OF CONTENTS
THE OFFERING...........................................................1
Securities Offered............................................1
Election to Purchase Common Stock in the Offering;
Priorities..................................................1
Value of Participation Interests..............................2
Method of Directing Transfer..................................2
Time for Directing Transfer...................................2
Irrevocability of Transfer Direction..........................2
Direction to Purchase Common Stock After the Offering.........2
Purchase Price of Common Stock................................3
Nature of a Participants Interest in Common Stock.............3
Voting Rights of Common Stock.................................3
DESCRIPTION OF THE PLAN................................................3
Introduction..................................................3
Eligibility and Participation.................................4
Contributions Under the Plan..................................4
Limitations on Contributions..................................5
Investment of Contributions and Account Balances..............7
Benefits Under the Plan.......................................9
Withdrawals and Distributions From the Plan...................9
Trustee .....................................................11
Plan Administrator ..........................................11
Reports to Plan Participants.................................11
Amendment and Termination....................................12
Merger, Consolidation or Transfer............................12
Federal Income Tax Consequences..............................12
ERISA and Other Qualifications...............................15
SEC Reporting and Short-Swing Profit Liability...............15
Financial Information Regarding Plan Assets..................16
LEGAL OPINION.........................................................16
<PAGE>
THE OFFERING
Securities Offered
The securities offered hereby are participation interests in the Plan.
Up to 65,000 shares (assuming a purchase price of $10.00 per share) of Common
Stock may be acquired by the Plan to be held in the Employer Stock Fund. The
Company is the issuer of the Common Stock. Only employees of the Bank may become
Participants in the Plan. The Common Stock to be issued hereby is conditioned on
the consummation of the formation of the Company. A Participant's investment in
the Employer Stock Fund in the Offering is subject to the priority set forth in
the Stock Issuance Plan. Information with regard to the Plan is contained in
this Prospectus Supplement and information with regard to the Stock Issuance
Plan and the financial condition, results of operation and business of the Bank
is contained in the attached Prospectus. The address of the principal executive
office of the Bank is 81 Main Street, Medway, Massachusetts 02053. The Bank's
telephone number is (508) 533-4343.
Election to Purchase Common Stock in the Offering; Priorities
The Plan permits each Participant to direct that all or part of the
funds which represent his or her beneficial interest in the assets of the Plan
may be transferred to the Employer Stock Fund, an investment fund in the Plan,
that will invest in Common Stock and will be used to purchase Common Stock
issued in connection with the Offering. The Trustee of the Plan will purchase
Common Stock offered for sale in connection with the Offering in accordance with
each Participant's directions. Participants will be provided the opportunity to
elect alternative investments from among the eight other funds offered. In the
event the Offering is oversubscribed and the Trustee is unable to use the full
amount allocated by a Participant to purchase Common Stock in the Offering, the
amount that cannot be invested in Common Stock shall be reinvested in the
investment funds of the Plan from which they were withdrawn. If a Participant
fails to direct the investment of his or her account balance, the Participant's
account balance will remain in the other investment funds of the Plan as
directed by the Participant.
The shares of Common Stock to be sold in the Offering are being offered
in accordance with the following priorities: (i) holders of deposit accounts of
the Bank totaling $50 or more as of March 31, 1997 ("Eligible Account Holders");
(ii) holders of deposit accounts of the Bank totaling $50 or more as of June 30,
1998 ("Supplemental Eligible Account Holders"); (iii) Tax-Qualified Employee
Plans, including the Employee Stock Ownership Plan ("ESOP") and the Plan; (iv)
the Bank's and Service Bancorp, MHC's employees, officers, directors and
trustees; (v) certain participants of the general public with preference given
to natural persons residing in the Massachusetts towns of Franklin, Medfield,
Medway and Millis. To the extent that Participants fall into one of these
categories, they are being permitted to use funds in their Plan account to
subscribe or pay for the Common Stock being acquired. Common Stock so purchased
will be placed in the Participant's Employer Stock Fund within his Plan account.
Funds not transferred to the Employer Stock Fund will remain in the other
investment funds of the Plan as directed by the Participant.
1
<PAGE>
Value of Participation Interests
The assets of the Plan were valued at approximately $630,000 as of
March 31, 1998. Each Participant was informed of the value of his or her
beneficial interest in the Plan as of March 31, 1998. The $630,000 value
represents the aggregate market value as of March 31, 1998, of all Participants'
accounts and earnings thereon, less previous withdrawals.
Method of Directing Transfer
Each Participant shall receive a form which provides for a Participant
to direct that all or a portion of his or her beneficial interest in the Plan be
transferred to the Employer Stock Fund (the "Investment Direction Form"). The
Participant's investment in the investment options set forth in the Plan may be
in any whole percentage from 0% to 100%. If a Participant wishes to invest all
or part of his or her beneficial interest in the assets of the Plan to the
purchase of Common Stock issued in connection with the Offering, he or she
should indicate that decision on the Investment Direction Form.
Time for Directing Transfer
Directions to transfer amounts to the Employer Stock Fund in order to
purchase Common Stock issued in connection with the Offering must be returned to
the Savings Banks Employees Retirement Association, Attention: Thomas Forese,
Jr., One Linscott Road, Woburn, Massachusetts 01801 no later than 12 p.m. on
September ___, 1998.
Irrevocability of Transfer Direction
A Participant's direction to transfer amounts credited to such
Participant's account in the Plan to the Employer Stock Fund in order to
purchase shares of Common Stock in connection with the Offering is irrevocable.
Participants, however, will be able to direct the investment of their accounts
under the Plan as explained below.
Direction to Purchase Common Stock After the Offering
After the Offering, a Participant will continue to be able to direct
that a certain percentage of his or her interest in the Plan be transferred to
the Employer Stock Fund and invested in Common Stock, or to the other investment
funds available under the Plan (amounts invested in the investment funds may be
invested in any whole percentage from 0% to 100%). The allocation of a
Participant's interest in a Plan Fund may be changed once per calendar quarter.
Special restrictions may apply to transfers directed to and from the Employer
Stock Fund by those Participants who are officers, directors and principal
shareholders of the Company who are subject to the provisions of Section 16(b)
of the Securities and Exchange Act of 1934 (the "Exchange Act"), as amended.
2
<PAGE>
Purchase Price of Common Stock
The funds transferred to the Employer Stock Fund for the purchase of
Common Stock in connection with the Offering will be used by the Trustee to
purchase shares of Common Stock, except in the event of an oversubscription, as
discussed above. The price paid for such shares of Common Stock will be the same
price as is paid by all other persons who purchase shares of Common Stock in the
Offering.
Subsequent to the Offering, Common Stock purchased by the Trustee will
be acquired in open market transactions. The prices paid by the Trustee for
shares of Common Stock will not exceed "adequate consideration" as defined in
Section 3(18) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
Nature of a Participant's Interest in the Common Stock
The Common Stock will be held in the name of the Trustee for the Plan,
as Trustee. Shares of Common Stock acquired at the direction of a Participant
will be allocated to the Participant's account under the Plan. Therefore,
earnings with respect to a Participant's account should not be affected by the
investment designations (including investments in Common Stock) of other
Participants. The Trustee as record holder will vote such allocated shares. The
Trustee will vote the allocated shares as directed by Participants only in the
event of a tender offer.
Voting Rights of Common Stock
The Trustee generally will exercise voting rights attributable to all
Common Stock held by the Employer Stock Fund in the best interests of the
Participants and beneficiaries. With respect to a tender offer, each Participant
will be allocated voting instruction rights reflecting such Participant's
proportionate interest in the Employer Stock Fund. The number of shares of
Common Stock held in the Employer Stock Fund that are voted in the affirmative
and negative on each matter shall be proportionate to the number of voting
instruction rights exercised by Participants in the affirmative and negative
respectively.
DESCRIPTION OF THE PLAN
Introduction
The Bank adopted a volume submitter plan effective October 1, 1991. The
Plan is a profit sharing plan with a cash or deferred compensation feature
established in accordance with the requirements under Section 401(a) and Section
401(k) of the Internal Revenue Code of 1986, as amended (the "Code"). The Plan
is qualified under Section 401(a) of the Code, and its related trust is
qualified under Section 501(a) of the Code.
3
<PAGE>
The Bank intends that the Plan, in operation, will comply with the
requirements under Section 401(a) and Section 401(k) of the Code. The Bank will
adopt any amendments to the Plan that may be necessary to ensure the qualified
status of the Plan under the Code and applicable Treasury Regulations.
Employee Retirement Income Security Act. The Plan is an "individual
account plan" other than a "money purchase pension plan" within the meaning of
ERISA. As such, the Plan is subject to all of the provisions of Title I
(Protection of Employee Benefit Rights) and Title II (Amendments to the Internal
Revenue Code Relating to Retirement Plans) of ERISA, except the funding
requirements contained in Part 3 of Title I of ERISA which by their terms do not
apply to an individual account plan (other than a money purchase plan). The Plan
is not subject to Title IV (Plan Termination Insurance) of ERISA. The funding
requirements contained in Title IV of ERISA are not applicable to Participants
(as defined below) or beneficiaries under the Plan.
Reference to full Text of Plan. The following statements are summaries
of certain provisions of the Plan. They are not complete and are qualified in
their entirety by the full text of the Plan. Words capitalized but not defined
in the following discussion have the same meaning as set forth in the Plan.
Copies of the Plan are available to all employees by filing a request with the
Plan Administrator, c/o Summit Bank, 81 Main Street, Medway, Massachusetts
02053. Each employee is urged to read carefully the full text of the Plan.
Eligibility and Participation
Any employee of the Bank is eligible to become a Participant in the
Plan on the first day of the month following completion of one (1 ) Year of
Service, provided he or she has reached age 21 at such time. A Year of Service
is defined as a computation period during which an employee completes at least
1000 hours of service. The plan year is November 1 to October 31 (the "Plan
Year").
As of March 31, 1998, there were approximately 37 employees eligible to
participate in the Plan, and 34 employees participating by making elective
deferral contributions.
Contributions Under the Plan
401(k) Plan Contributions. Each Participant of the Plan is permitted to
elect to defer such Participant's Compensation on a pre-tax basis up to the
lesser of 15% of annual Compensation paid to the Participant during the Plan
Year or the applicable limit under the Code (for 1998, the applicable limit is
$10,000) and subject to certain other restrictions imposed by the Code, and to
have that amount contributed to the Plan on such Participant's behalf. In 1998,
the Compensation of each Participant taken into account under the Plan was and
is limited to $160,000. (Limits established by the IRS are subject to increase
pursuant to an annual cost of living adjustment, as permitted by the Code). A
Participant may elect to modify the amount contributed to the Plan by filing a
new deferral agreement form with the Plan Administrator on a monthly basis.
4
<PAGE>
Employer Contributions. The Bank makes matching contributions to the
Plan equal to 50% of the elective deferral contributions, up to a maximum of 6%
of the Participant's Compensation for the Plan Year.
Limitations on Contributions
Limitation on Employee Salary Deferrals. The annual amount of deferred
Compensation of a Participant (when aggregated with any elective deferrals of
the Participant under a simplified employee pension plan or a tax-deferred
annuity) may not exceed the limitation contained in Section 402(g) of the Code,
adjusted for increases in the cost of living as permitted by the Code (the
limitation for 1998 is $10,000). Contributions in excess of this limitation
("excess deferrals") will be included in the Participant's gross income for
federal income tax purposes in the year they are made. In addition, any such
excess deferral will again be subject to federal income tax when distributed by
the Plan to the Participant, unless the excess deferral (together with any
income allocable thereto) is distributed to the Participant not later than the
first April 15th following the close of the taxable year in which the excess
deferral is made. Any income on the excess deferral that is distributed not
later than such date shall be treated, for federal income tax purposes, as
earned and received by the Participant in the taxable year in which the
distribution is made.
Limitations on Annual Additions and Benefits. Pursuant to the
requirements of the Code, the Plan provides that the amount of contributions and
forfeitures allocated to each Participant's account during any Plan Year may not
exceed the lesser of $30,000 or 25% of the Participant's Compensation for the
Plan Year. In addition, annual additions are limited to the extent necessary to
prevent contributions on behalf of any employee from exceeding the employee's
combined plan limit, i.e., a limit that takes into account the contributions and
benefits made on behalf of an employee to all plans of the Bank. To the extent
that these limitations have been exceeded with respect to a Participant, the
Plan Administrator shall:
(i) return any elective deferral contributions to the extent that the
return would reduce the excess amount in the Participant's accounts;
(ii) if the Participant is covered by the Plan at the end of the Plan
Year, any excess amount remaining will be used to reduce Employer Contributions
for such Participant in the next Plan Year, and each succeeding Plan Year if
necessary;
(iii) if an excess amount still exists, and the Participant is not
covered by the Plan at the end of a Plan Year, the Excess Amount will be held
unallocated in a suspense account. The suspense account will be applied to
reduce future Employer Contributions for all remaining Participants in the next
Plan Year, and each succeeding Plan Year if necessary;
(iv) if a suspense account is in existence at any time during a Plan
Year, it will not participate in the allocation of the trust's investment gains
or losses. If a suspense account is in existence at any time during a particular
Plan Year, all amounts in the suspense accounts must be
5
<PAGE>
allocated and reallocated to Participant's Accounts before any employer or any
Participant contributions may be made to the Plan for that Plan Year. Excess
amounts may not be distributed to Participants or former Participants.
If, in addition to this Plan, the Participant is covered under other
defined contribution plans and welfare benefit funds maintained by the Bank and
annual additions exceed the maximum permissible amount, the amount contributed
or allocated under this Plan will be reduced so that the annual additions under
all such plans and funds equal the maximum permissible amount.
Limitation on Plan Contributions for Highly Compensated Employees.
Sections 401(k) and 401(m) of the Code limits the amount of elective deferral
contributions and matching contributions that may be made to the Plan in any
Plan Year on behalf of Highly Compensated Employees (defined below) in relation
to the amount of elective deferral contributions made by or on behalf of all
other employees eligible to participate in the Plan. Specifically, the "actual
deferral percentage" ("ADP") (i.e., the average of the actual deferral ratios,
expressed as a percentage, of each eligible employee's elective deferral
contribution if any, for the Plan Year over the employee's Compensation), of the
Highly Compensated Employees must meet either of the following tests: (i) the
ADP of the eligible Highly Compensated Employees is not more than 125% of the
ADP of all other eligible employees, or (ii) the ADP of the eligible Highly
Compensated Employees is not more than 200% of the ADP of all other eligible
employees, and the excess of the ADP for the eligible Highly Compensated
Employees over the ADP of all other eligible employees is not more than two
percentage points. Similarly, the actual contribution percentage ("ACP") (i.e.,
the average of the actual contribution ratios, expressed as a percentage, of
each eligible employee's matching contributions, if any, for the Plan Year over
the employee's Compensation) of the Highly Compensated Employees must meet
either of the following tests: (i) the ACP of the eligible Highly Compensated
Employees is not more than 125% of the ACP of all other eligible employees, or
(ii) the ACP of the eligible Highly Compensated Employees is not more than 200%
of the ACP of all other eligible employees, and the excess of the ACP for the
eligible Highly Compensated Employees over the ACP of all other employees is not
more than two percentage points.
In general, for Plan Years beginning in 1997, a Highly Compensated
Employee includes any employee, who, (1) during the Plan Year or the preceding
Plan Year, was at any time a 5% owner (i.e., owns directly or indirectly more
than 5% of the stock of an employer, or stock possessing more than 5% of the
total combined voting power of all stock of an employer), or (2) for the
preceding Plan Year, received Compensation from an employer in excess of $80,000
(subject to cost-of-living adjustment by the IRS), and (if the employer elects
for a Plan Year) was in the group consisting of the top 20% of employees when
ranked on the basis of Compensation paid during the Plan Year. The dollar
amounts set forth above are adjusted annually to reflect increases in the cost
of living.
In order to prevent the disqualification of the Plan, any amount
contributed by Highly Compensated Employees that exceed the ADP limitation in
any Plan Year ("excess contributions"), together with any income allocable
thereto, must be distributed first to Highly Compensated Employees with the
greatest dollar amount of deferrals, and so on, until the Plan satisfies the ADP
6
<PAGE>
test, before the close of the following Plan Year. Moreover, the Bank will be
subject to a 10% excise tax on any excess contributions unless such excess
contributions, together with any income allocable thereto, either are
re-characterized or are distributed before the close of the first 2-1/2 months
following the Plan Year to which such excess contributions relate. In addition,
in order to avoid disqualification of the Plan, any contributions by Highly
Compensated Employees that exceed the average contribution limitation in any
Plan Year ("excess aggregate contributions") together with any income allocable
thereto, must be distributed to such Highly Compensated Employees before the
close of the following Plan Year. However, the 10% excise tax will be imposed on
the Bank with respect to any excess aggregate contributions, unless such
amounts, plus any income allocable thereto, are distributed within 2-1/2 months
following the close of the Plan Year in which they arose.
Investment of Contributions and Account Balances
All amounts credited to Participants' accounts under the Plan are held
in the Plan Trust (the "Trust") which is administered by the Trustee appointed
by the Bank's Board of Directors.
Prior to the effective date of the Offering, Participants have been
provided the opportunity to direct the investment of their accounts into one of
the following funds (the "Funds"):
A. Money Market Account
B. Asset Allocation Account
C. Equity Account
D. Bond Account
E. Enhanced Index Account (Fidelity Select Equity Account)
F. Vanguard Index 500 Account
G. International Equity Account
H. Small Cap Equity Account (Putnam OTC Emerging Growth Account)
The Plan now provides that in addition to the Funds specified above, a
Participant may direct the Trustee to invest all or a portion of his account in
the Employer Stock Fund.
A Participant may elect to have both past contributions (and earnings),
as well as future contributions to the Participant's account invested either in
the Employer Stock Fund or among the Funds listed above. Transfers of past
contributions (and the earnings thereon) do not affect the investment mix of
future contributions. Generally, these elections will be effective on the last
day of the calendar quarter following the Participant's notice to the Plan
record-keeper. Following the deduction from each payroll, contributions are held
in a non-allocated suspense account by the Trustee until the end of the calendar
quarter. While held in suspense, non-allocated contributions are credited with
the average return of the Money Market Fund for the calendar quarter during
which the contributions were held in suspense.
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<PAGE>
A. Previous Funds
Prior to the effective date of the Offering, contributions under the
Plan have been invested in the eight Funds specified above. The average
compounded rates of return on these Funds was:
<TABLE>
<CAPTION>
Average Annualized Compounded Return
Quarter ended -----------------------------------------------
3/31/98 1 year 3 year 5 year 10 year
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
A. Money Market Account 1.30% 5.45% 5.63% 4.91% 5.78%
B. Asset Allocation Account 8.87% 26.60% 19.67% 15.00% 12.86%
C. Equity Account 12.84% 41.95% 27.41% 19.63% 14.67%
D. Bond Account 1.99% 11.15% 9.05% 6.49% 8.47%
E. Fidelity Enhanced Inception 5-93
Index Account 15.09% 48.59% 32.55% 23.34%
F. Vanguard Index 500 Fund 13.94% 48.00% 32.72% 22.28% 18.75%
G. International Equity Account 13.80% 26.05% 17.70% 13.07% 10.22%
H. Small Cap Equity Account 12.35% 52.21% 30.68% 26.46% 19.59%
</TABLE>
The following is a description of each of the Plan's eight investment
Funds:
Money Market Account The "Money Market Account" seeks to provide income
consistent with the preservation of principal. The Money Market Account invests
solely in U.S. Treasury or agency obligations with maturities of six months or
less.
Asset Allocation Account The "Asset Allocation Account" seeks to
provide a high level total return consistent with the preservation of capital
through investment in mutual funds investing in common stocks, bonds and money
market investments both in the United States and abroad.
Equity Account The "Equity Account" seeks to provide capital
appreciation through a professionally managed, diversified portfolio of domestic
and international stocks.
Bond Account The "Bond Account" seeks to provide a real rate of return
after inflation with a high degree of stability and low volatility. The Bond
Account is invested exclusively in U. S. Treasury obligations and other
obligations guaranteed by the U. S. Government or its agencies.
Enhanced Index Account The "Enhanced Index Account" seeks to
consistently provide excess returns over the Standard & Poor's 500 Composite
Price Index by maintaining portfolio characteristics and industry weights
similar to those of the S&P 500 Index but investing only in stocks held by
Fidelity Investments' 37 select mutual funds. The holdings in the Account may
include securities that are not part of the S&P 500 Index.
Index 500 Account The "Index 500 Account" attempts to provide
investment results that parallel the performance of the Standard & Poor's 500
Composite Price Index.
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<PAGE>
International Equity Account The "International Equity Account" seeks
to provide long-term capital appreciation by investing in foreign equity
securities.
Small Cap Equity Account The "Small Cap Equity Account" seeks long-term
growth by investing primarily in common stocks of small to medium sized
companies that The Putnam Company believes have potential for capital
appreciation significantly greater than that of the market averages.
B. The Employer Stock Fund
The Employer Stock Fund will consist of investments in Common Stock
made on and after the effective date of the Offering as well as cash and money
market instruments. Accordingly, the investment performance of the Employer
Stock Fund should closely parallel the performance of the Common Stock but is
not guaranteed to replicate the performance. After the Offering, the Trustee
will, to the extent practicable, use all amounts held by it in the Employer
Stock Fund, including cash dividends paid on Common Stock held in the Employer
Stock Fund, to purchase Common Stock. If, for any reason, the Trustee is unable
to purchase Common Stock with all amounts held in the Employer Stock Fund, the
non-allocated amounts will be held in State Street Bank and Trust Company's
Seven Seas United States Government Money Market Fund until all amounts are used
to purchase Common Stock. It is expected that all purchases will be made at
prevailing market prices. Under certain circumstances, the Trustee may be
required to limit the daily volume of shares purchased.
As of the date of this Prospectus Supplement, none of the shares of
Common Stock have been issued or are outstanding and there is no established
market for the Common Stock. Accordingly, there is no record of the historical
performance of the Employer Stock Fund. Performance will be dependent upon a
number of factors, including the financial condition and profitability of the
Company and the Bank and market conditions for the Common Stock generally.
INVESTMENT IN THE EMPLOYER STOCK FUND MAY INVOLVE CERTAIN RISKS IN
INVESTMENT IN COMMON STOCK OF THE COMPANY. FOR A DISCUSSION OF THESE RISK
FACTORS, SEE PAGE __ OF THE PROSPECTUS.
Benefits Under the Plan
Vesting. A Participant, at all times, has a fully vested,
nonforfeitable interest in his or her account under the Plan.
Withdrawals and Distributions From the Plan
APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL
RESTRICTIONS ON THE RIGHT OF A PLAN PARTICIPANT TO WITHDRAW AMOUNTS HELD FOR HIS
OR HER BENEFIT UNDER THE PLAN PRIOR
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<PAGE>
TO THE PARTICIPANT'S TERMINATION OF EMPLOYMENT WITH THE BANK. A SUBSTANTIAL
FEDERAL TAX PENALTY MAY ALSO BE IMPOSED ON WITHDRAWALS MADE PRIOR TO THE
PARTICIPANT'S ATTAINMENT OF AGE 59-1/2, REGARDLESS OF WHETHER SUCH A WITHDRAWAL
OCCURS DURING HIS OR HER EMPLOYMENT WITH THE BANK OR AFTER TERMINATION OF
EMPLOYMENT.
Withdrawals Prior to Termination of Employment. A Participant may make
a withdrawal from his or her elective deferral contributions prior to
termination of employment in the event of financial hardship, subject to the
hardship distribution rules under the Plan. A Participant may also borrow money
from his or her account, which loan may not exceed the lesser of $50,000 or 50%
of the Participant's total account balance.
Distribution Upon Retirement or Disability. Unless an optional form of
benefit has been elected, the automatic form of benefit payable to a married
Participant shall be a qualified joint and survivor annuity. If the Participant
is not married, the automatic form of benefit is a life annuity. The optional
forms of retirement benefit shall be the following: a single sum distribution, a
life annuity (over the life of the Participant or the life of the Participant
and designated Beneficiary) or a period certain, not greater than the
Participant's life expectancy or the joint and last survivor life expectancy of
the Participant and Beneficiary. Benefit payments ordinarily will be made as
soon as possible following retirement. A participant may retire following the
attainment of his early retirement age (59-1/2) or normal retirement age (65).
With respect to a 5% owner, benefit payments must commence in no event later
than April 1 following the calendar year in which the Participant attains age
70-1/2.
Distribution Upon Death. A Participant who dies prior to the annuity
starting date for retirement, disability or termination of employment shall have
his or her benefits paid to the surviving spouse or beneficiary under one or
more of the forms available under the Plan. Distribution of the Participant's
entire interest must be completed by December 31 of the fifth year following his
death unless the beneficiary is a spouse, in which case the spouse may elect to
defer distributions no later than December 31 of the year in which the
Participant would have attained age 70-1/2. If the Participant designates a
non-spouse beneficiary, the beneficiary may elect distributions over the life or
a period certain not greater than the life expectancy of the designated
beneficiary commencing on or before December 31 of the year following the year
in which the Participant died.
Distribution Upon Termination for Any Other Reason. Distribution of
benefits to a Participant who terminates employment for any other reason will
not be made to the Participant at the time of termination but shall be made on
the earliest retirement date under the plan (i.e., upon the Participant's death,
disability, or attainment of early or normal retirement age). Alternatively, at
the Participant's election, a Participant may receive a distribution of his
account after he ceases to be an employee. If a Participant's vested account has
never exceeded $3,500, the entire vested account may be distributed in a single
sum as of the earliest of the Participant's retirement date, death, or the date
the Participant ceases to be an employee for any other reason.
10
<PAGE>
No Distribution of Common Stock. No distributions of Common Stock will
be made from the Plan.
Nonalienation of Benefits. Except with respect to federal income tax
withholding and as provided with respect to a qualified domestic relations order
(as defined in the Code), benefits payable under the Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to
benefits payable under the Plan shall be void.
Trustee
The Trustee for all funds of the Plan, including the Employer Stock
Fund, is Savings Banks Employees Retirement Association (SBERA).
The Trustee receives, holds and invests the contributions to the
Employer Stock Fund of the Plan in trust and distributes them to Participants
and beneficiaries in accordance with the terms of the Plan and the directions of
the Plan Administrator. The Trustee is responsible for investment of the assets
of the Trust.
Plan Administrator
Pursuant to the terms of the Plan, the Plan is administered by the plan
administrator (the "Plan Administrator"). The Bank is the Plan Administrator and
has designated SBERA to supervise its responsibilities as such. The address and
telephone number of the Plan representative is c/o Savings Banks Employees
Retirement Association, Attention: Thomas Forese, Jr., One Linscott Road,
Woburn, Massachusetts 01801, Telephone number (978) 938-3500. The Plan
Administrator is responsible for the administration of the Plan, interpretation
of the provisions of the Plan, prescribing procedures for filing applications
for benefits, preparation and distribution of information explaining the Plan,
maintenance of plan records, books of account and all other data necessary for
the proper administration of the Plan, and preparation and filing of all returns
and reports relating to the Plan which are required to be filed with the U.S.
Department of Labor and the IRS, and for all disclosures required to be made to
Participants, beneficiaries, and others under Sections 104 and 105 of ERISA.
Reports to Plan Participants
Currently, the Plan Administrator furnishes to each Participant a
quarterly statement showing (i) the balance in the Participant's account as of
the end of that period, (ii) the amount of contributions allocated to such
Participant's account for that period, and (iii) the adjustments to such
Participant's account to reflect earnings or losses (if any). As of October 1,
1998, Participants will have access to the value of their accounts on a daily
basis.
11
<PAGE>
Amendment and Termination
It is the intention of the Bank to continue the Plan indefinitely.
Nevertheless, the Bank may terminate the Plan at any time. If the Plan is
terminated in whole or in part, then regardless of other provisions in the Plan,
each employee affected by such termination shall have a fully vested interest in
his or her accounts. The Bank reserves the right to make, from time to time, any
amendment or amendments to the Plan which do not cause any part of the Trust to
be used for, or diverted to, any purpose other than the exclusive benefit of
Participants or their beneficiaries; provided, however, that the Bank may make
any amendment it determines necessary or desirable, with or without retroactive
effect, to comply with ERISA.
Merger, Consolidation or Transfer
In the event of the merger or consolidation of the Plan with another
plan, or the transfer of the Trust assets to another plan, the Plan requires
that each Participant would (if either the Plan or the other plan then
terminated) receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he or she would have been
entitled to receive immediately before the merger, consolidation or transfer (if
the Plan had then terminated).
Federal Income Tax Consequences
The following is only a brief summary of certain federal income tax
aspects of the Plan which are of general application under the Code and is not
intended to be a complete or definitive description of the federal income tax
consequences of participating in or receiving distributions from the Plan. The
summary is necessarily general in nature and does not purport to be complete.
Moreover, statutory provisions are subject to change, as are their
interpretations, and their application may vary in individual circumstances.
Finally, the consequences under applicable state and local income tax laws may
not be the same as under the federal income tax laws. Participants are urged to
consult their tax advisors with respect to any distribution from the Plan and
transactions involving the Plan.
The Plan is qualified under Section 401(a) and 401(k) of the Code and
the related Trust is exempt from tax under Section 501(a) of the Code. A plan
that is qualified under these sections of the Code is afforded special tax
treatment which include the following: (1) the Bank is allowed an immediate tax
deduction for the amount contributed to the Plan each year; (2) Participants pay
no current income tax on amounts contributed by the Bank on their behalf; and
(3) Earnings of the Plan are tax-exempt thereby permitting the tax-free
accumulation of income and gains on investments. The Plan will be administered
to comply in operation with the requirements of the Code as of the applicable
effective date of any change in the law. The Bank expects to timely adopt any
amendments to the Plan that may be necessary to maintain the qualified status of
the Plan under the Code.
12
<PAGE>
Assuming that the Plan is administered in accordance with the
requirements of the Code, participation in the Plan under existing federal
income tax laws will have the following effects:
(a) Amounts contributed to a Participant's account and the investment
earnings on the account are not includable in a Participant's federal taxable
income until such contributions or earnings are actually distributed or
withdrawn from the Plan. Special tax treatment may apply to the taxable portion
of any distribution that includes Common Stock or qualifies as a Lump Sum
Distribution (as described below).
(b) Income earned on assets held by the Trust will not be taxable to
the Trust.
Lump Sum Distribution. A distribution from the Plan to a Participant or
the beneficiary of a Participant will qualify as a lump sum distribution ("Lump
Sum Distribution") if it is made: (i) within one taxable year of the Participant
or beneficiary; (ii) on account of the Participant's death, disability or
separation from service, or after the Participant attains age 59-1/2; and (ii)
consists of the balance to the credit of the Participant under this Plan and all
other profit sharing plans, if any, maintained by the Bank. The portion of any
Lump Sum Distribution that is required to be included in the Participant's or
beneficiary's taxable income for federal income tax purposes (the"total taxable
amount") consists of the entire amount of such Lump Sum Distribution less the
amount of after-tax contributions, if any, made by the Participant to any other
profit sharing plan maintained by the Bank which is included in such
distribution.
Averaging Rules. The portion of the total taxable amount of a Lump Sum
Distribution that is attributable to participation after 1973 in the Plan or in
any other profit-sharing plan maintained by the Bank (the "ordinary income
portion") will be taxable generally as ordinary income for federal income tax
purposes. However, a Participant who has completed at least five years of
participation in the Plan before the taxable year in which the distribution is
made, or a beneficiary who receives a Lump Sum Distribution on account of the
Participant's death (regardless of the period of the Participant's participation
in the Plan or any other profit-sharing plan maintained by the Bank), may elect
to have the ordinary income portion of such Lump Sum Distribution taxed
according to a special averaging rule ("five-year averaging"). The election of
the special averaging rules may apply only to one Lump Sum Distribution received
by the Participant or beneficiary, provided such amount is received on or after
the Participant turns 59-1/2 and the recipient elects to have any other Lump Sum
Distribution from a qualified plan received in the same taxable year taxed under
the special averaging rule. Under a special grandfather rule, individuals who
turned 50 by 1985 may elect to have their Lump Sum Distribution taxed under
either the five-year averaging rule or under the prior law ten-year averaging
rule.
Contribution to Another Qualified Plan or to an IRA. A Participant may
defer federal income taxation of all or any portion of the total taxable amount
of a Lump Sum Distribution (including the proceeds from the sale of any Common
Stock included in the Lump Sum Distribution) to the extent that such amount, or
a portion thereof, is contributed, within 60 days after the date of its receipt
by the Participant, to another qualified plan or to an individual retirement
account ("IRA"). If less than
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<PAGE>
the total taxable amount of a Lump Sum Distribution is contributed to another
qualified plan or to an IRA within the applicable 60-day period, the amount not
so contributed must be included in the Participant's income for federal income
tax purposes and will not be eligible for the special averaging rules or for
capital gains treatment. Additionally, a Participant may defer the federal
income taxation of any portion of an amount distributed from the Plan on account
of the Participant's disability or separation from service, generally, if the
amount is distributed within one taxable year of the Participant, and such
amount is contributed, within 60 days after the date of its receipt by the
Participant, to an IRA. Prior to 1993, following the partial distribution of a
Participant's account, any remaining balance under the Plan (and the balance to
the credit of the Participant under any other profit sharing plan sponsored by
the Bank) would not be eligible for the special averaging rules or for capital
gains treatment. For these purposes, a "partial distribution" is a distribution
within one taxable year of the Participant equal to at least 50% of the balance
of a Participant's account ("Partial Distribution").
Pursuant to a change in the law, effective January 1, 1993, virtually
all distributions from the Plan may be rolled over to another qualified Plan or
to an IRA without regard to whether the distribution is a Lump Sum Distribution
or a Partial Distribution. Effective January 1, 1993, Participants have the
right to elect to have the Trustee transfer all or any portion of an "eligible
rollover distribution" directly to another plan qualified under Section 401(a)
of the Code or to an IRA. If the Participant does not elect to have an "eligible
rollover distribution" transferred directly to another qualified plan or to an
IRA, the distribution will be subject to a mandatory federal withholding tax
equal to 20% of the taxable distribution. An "eligible rollover distribution"
means any amount distributed from the Plan except: (1) a distribution that is
(a) one of a series of substantially equal periodic payments made (not less
frequently than annually ) over the Participant's life or the joint life of the
Participant and the Participant's designated beneficiary, or (b) for a specified
period of ten years or more; (2) any amount that is required to be distributed
under the minimum distribution rules; and (3) any other distributions excepted
under applicable federal law.
The beneficiary of a Participant who is the Participant's surviving
spouse also may defer federal income taxation of all or any portion of a
distribution from the Plan to the extent that such amount, or a portion thereof,
is contributed within 60 days after the date of its receipt by the surviving
spouse, to an IRA. If all or any portion of the total taxable amount of a Lump
Sum Distribution is contributed by the surviving spouse of a Participant to an
IRA within the applicable 60-day period, any subsequent distribution from the
IRA will not be eligible for the special averaging rules or for capital gains
treatment. Any amount received by the Participant's surviving spouse that is not
contributed to another qualified plan or to an IRA within the applicable 60-day
period, and any amount received by a nonspouse beneficiary will be included in
such beneficiary's income for federal tax purposes in the year in which it is
received.
Additional Tax on Early Distributions. A Participant who receives a
distribution from the Plan prior to attaining age 59 1/2 will be subject to an
additional income tax equal to 10% of the taxable amount of the distribution.
The 10% additional income tax will not apply, however, to the extent the
distribution is rolled over into an IRA or another qualified plan or the
distribution is (i)
14
<PAGE>
made to a beneficiary (or to the estate or a Participant) on or after the death
of the Participant, (ii) attributable to the Participant's being disabled within
the meaning of Section 72(m)(7) of the Code, (iii) part of a series of
substantially equal periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the Participant or the joint lives (or
joint life expectancies) of the Participant and his beneficiary, (iv) made to
the Participant after separation from service on account of early retirement
under the Plan after attainment of age 55, (v) made to pay medical expenses to
the extent deductible for federal income tax purposes, (vi) payments made to an
alternate payee pursuant to a qualified domestic relations order, or (vii) made
to effect the distribution of excess contributions or excess deferrals.
ERISA and Other Qualifications
As noted above, the Plan is subject to certain provisions of the ERISA
and has applied for a favorable determination that it is qualified under Section
401(a) of the Code.
The foregoing is only a brief summary of certain federal income tax
aspects of the Plan which are of general application under the Code and is not
intended to be a complete or definitive description of the federal income tax
consequences of participating in or receiving distributions from the Plan.
Accordingly, each Participant is urged to consult a tax advisor concerning the
federal, state and local tax consequences of participating in and receiving
distributions from the Plan.
SEC Reporting and Short-Swing Profit Liability
Section 16 of the Exchange Act imposes reporting and liability
requirements on officers, directors, and persons beneficially owning more than
10% of public companies such as the Company. Section 16(a) of the Exchange Act
requires the filing of reports of beneficial ownership. Within 10 days of
becoming a person subject to the reporting requirements of Section 16(a), a Form
3 reporting initial beneficial ownership must be filed with the Securities and
Exchange Commission ("SEC") . Certain changes in beneficial ownership, such as
purchases, sales and gifts must be reported periodically, either on a Form 4
within 10 days after the end of the month in which a change occurs, or annually
on a Form 5 within 45 days after the close of the Company's fiscal year. Certain
discretionary transactions in and beneficial ownership of the Common Stock
through the Employer Stock Fund of the Plan by officers, directors and persons
beneficially owning more than 10% of the Common Stock must be reported to the
SEC by such individuals.
In addition to the reporting requirements described above, Section
16(b) of the Exchange Act as provides for the recovery by the Company of profits
realized by an officer, director or any person beneficially owning more than 10%
of the Common Stock ("Section 16(b) Persons") resulting from non-exempt
purchases and sales of the Common Stock within any six-month period.
The SEC has adopted rules that provide exemption from the profit
recovery provisions of Section 16(b) for all transactions in employer securities
within an employee benefit plan, such as the Plan, provided certain requirements
are met. These requirements generally involve restrictions
15
<PAGE>
upon the timing of elections to acquire or dispose of employer securities for
the accounts of Section 16(b) Persons.
Except for distributions of Common Stock due to death, disability,
retirement, termination of employment or under a qualified domestic relations
order, Section 16(b) Persons are required to hold shares of Common Stock
distributed from the Plan for six months following such distribution and are
prohibited from directing additional purchases of units within the Employer
Stock Fund for six months after receiving such a distribution.
Financial Information Regarding Plan Assets
Financial statements representing the net assets available for Plan
benefits at December 31, 1997 are attached to this Prospectus Supplement.
LEGAL OPINION
The validity of the issuance of the Common Stock will be passed upon by
Luse Lehman Gorman Pomerenk & Schick, A Professional Corporation, Washington,
D.C., which firm acted as special counsel to the Bank in connection with the
Company's formation of the Company and concurrent stock issuance.
16
<PAGE>
PROSPECTUS
Up to 1,243,150 shares of common stock
SERVICE BANCORP, INC.
81 Main Street
Medway, Massachusetts 02053
(508) 533-4343
- --------------------------------------------------------------------------------
Service Bancorp, Inc., a Massachusetts-chartered stock holding company,
is offering for sale up to 1,243,150 shares, or 47%, of its common stock
pursuant to the terms of a stock issuance plan. Service Bancorp, Inc. will issue
the remaining 53% of its common stock to Service Bancorp, MHC, a Massachusetts
mutual holding company. Service Bancorp, Inc. has been organized as the mid-tier
stock holding company subsidiary of Service Bancorp, MHC, and will own 100% of
the common stock of Summit Bank, a Massachusetts-chartered stock savings bank.
The stock issuance plan has been approved by the corporators of Service Bancorp,
MHC, and has been conditionally approved by state and federal banking
regulators. Because the names of Summit Bank, Service Bancorp, Inc. and Service
Bancorp, MHC are so similar, we will refer to Summit Bank as the "Bank", we will
refer to Service Bancorp, Inc. as the "Stock Company" and we will refer to
Service Bancorp, MHC as the "Mutual Company."
- --------------------------------------------------------------------------------
TERMS OF OFFERING
An independent appraiser has estimated that the pro forma market value
of the Stock Company is between $17.0 million and $23.0 million. Based on this
estimate, the Stock Company will issue between 1.7 million and 2.3 million
shares of its common stock and intends to sell 47% of these shares, or between
799,000 and 1,081,000 shares, to depositors of the Bank and members of the
general public. The remaining 53% of the Stock Company's shares, or between
901,000 and 1,219,000 shares, will be issued to the Mutual Company. The number
of shares issued may be increased to 2,645,000 shares. If the number of shares
issued increases, the shares offered for sale in the stock offering will also
increase to up to 1,243,150 shares. The number of shares to be issued is subject
to regulatory approval. Based on these estimates, the Stock Company is making
the following offering of shares of common stock:
<TABLE>
<CAPTION>
Adjusted
Minimum Midpoint Maximum Maximum
------- -------- ------- -------
<S> <C> <C> <C> <C>
o Price per share................................. $10.00 $10.00 $10.00 $10.00
o Number of shares................................ 799,000 940,000 1,081,000 1,243,150
o Offering expenses............................... $482,016 $500,000 $500,000 $500,000
o Net proceeds.................................... $7,507,984 $8,900,000 $10,310,000 $11,931,500
o Net proceeds per share.......................... $9.40 $9.47 $9.54 $9.60
</TABLE>
Please refer to Risk Factors beginning on page _____ of this
prospectus. These securities are not deposits or accounts and are not insured or
guaranteed by the Federal Deposit Insurance Corporation, the Depositors
Insurance Fund or any other government agency, and are not guaranteed by the
Bank, the Stock Company or the Mutual Company. The common stock is subject to
investment risk, including the possible loss of principal invested. Neither the
Securities and Exchange Commission, the Massachusetts Division of Banks, the
Federal Deposit Insurance Corporation, nor any state securities regulator has
approved or disapproved these securities or determined if this prospectus is
accurate or complete. Any representation to the contrary is a criminal offense.
Trident Securities, Inc. will use its best efforts to assist in selling
at least the minimum number of shares of common stock but does not guarantee
that this number will be sold. All funds received from subscribers will be held
in an interest bearing savings account at the Bank until the completion or
termination of the stock offering. The Stock Company has applied to have the
common stock quoted on the Nasdaq SmallCap Market under the symbol "SUBC."
For information on how to subscribe, call the Stock Information Center
at (508) 533-________.
-----------------------
Prospectus dated August __, 1998
Trident Securities, Inc.
<PAGE>
[MAP]
2
<PAGE>
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING................................4
SUMMARY AND OVERVIEW..........................................................6
SELECTED FINANCIAL AND OTHER DATA............................................11
RECENT DEVELOPMENTS..........................................................13
RISK FACTORS.................................................................19
SERVICE BANCORP, MHC.........................................................25
SERVICE BANCORP, INC.........................................................25
SUMMIT BANK..................................................................25
REGULATORY CAPITAL COMPLIANCE................................................27
USE OF PROCEEDS..............................................................28
DIVIDEND POLICY..............................................................29
MARKET FOR COMMON STOCK......................................................29
CAPITALIZATION...............................................................30
PRO FORMA DATA...............................................................31
PARTICIPATION BY MANAGEMENT..................................................36
THE OFFERING AND THE REORGANIZATION..........................................37
SUMMIT BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME...................................49
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................50
BUSINESS OF THE COMPANY......................................................63
BUSINESS OF THE BANK.........................................................64
FEDERAL AND STATE TAXATION...................................................85
REGULATION...................................................................86
MANAGEMENT OF THE STOCK COMPANY..............................................95
MANAGEMENT OF THE BANK.......................................................97
RESTRICTIONS ON ACQUISITION OF THE STOCK COMPANY AND THE BANK...............107
DESCRIPTION OF CAPITAL STOCK OF THE STOCK COMPANY...........................110
TRANSFER AGENT AND REGISTRAR................................................111
LEGAL AND TAX MATTERS.......................................................111
EXPERTS ...................................................................112
ADDITIONAL INFORMATION......................................................112
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS .................................F-1
GLOSSARY ...................................................................G-1
This document contains forward-looking statements which involve risks
and uncertainties. The Stock Company's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
"Risk Factors" beginning on page ___ of this prospectus.
Please see the Glossary beginning on page G-1 for the meaning of capitalized
terms that are used in this prospectus.
3
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING
Q: What is the purpose of the stock offering?
A: We are selling shares of common stock so that we can raise capital to grow
and compete more effectively in our market area, and so that our
depositors, employees, management and directors may obtain an equity
ownership in the Bank. As part of the reorganization, you will have the
opportunity to become a stockholder of the Stock Company, which will allow
you to share indirectly in the future earnings and growth of our Bank. The
capital raised in the stock offering will enable us to expand our lending
and investment activities, and may be used to establish or acquire new
branch offices or acquire other financial institutions.
Q: Who will be permitted to purchase stock?
A: The stock will be offered on a priority basis to the following persons:
o Persons who had one or more deposit accounts with us with aggregate
balances of at least $50 on March 31, 1997. Any remaining shares will
be offered to:
o Persons who had one or more deposit accounts with us with aggregate
balances of at least $50 on June 30, 1998. Any remaining shares will
be offered to:
o The Bank's tax-qualified employee plans. Any remaining shares will be
offered to:
o The Bank's and the Mutual Company's employees, officers, directors and
trustees.
If the above persons do not subscribe for all of the shares of common
stock, the remaining shares will be offered to certain members of the
general public, with preference given to natural persons residing in the
Massachusetts towns of Franklin, Medfield, Medway and Millis.
Q: How much stock may I order?
A: The minimum order is 25 shares (or $250). The maximum order for any
individual person, persons having a joint account, or persons acting
together is 10,000 shares (or $100,000). We may decrease or increase the
maximum purchase limitation without notifying you. However, if we increase
the maximum purchase limitation, and you previously subscribed for the
maximum number of shares, you will be given the opportunity to subscribe
for additional shares.
Q: What happens if there are not enough shares to fill all orders?
A: If the stock offering is oversubscribed in any of the categories listed
above, then shares will be allocated among all subscribers in that category
based on a formula that is described in detail in "The Offering and the
Reorganization" section of this prospectus.
Q: How do I order the stock?
A: You must complete and return the stock order form and certification to us
together with your payment, so that we receive it on or before 12:00 noon,
Massachusetts time, on September___, 1998. Payment may only be made by (i)
check or money order, or (ii) authorization of withdrawal from passbook or
money market accounts or certificates of deposit maintained by the Bank.
4
<PAGE>
Q: As a depositor of Summit Bank, what will happen if I do not order any
common stock?
A: You are not required to purchase common stock. Your deposit accounts,
certificate accounts and any loans you may have with the Bank will not be
affected by the stock offering.
Q: How do I decide whether to buy stock in the stock offering?
A: In order to make an informed investment decision, you should read this
entire prospectus, particularly the section titled "Risk Factors."
Q: Who can help answer any questions I may have about the stock offering?
If you have questions about the Offering, you may contact:
Stock Information Center
Summit Bank
81 Main Street
Medway, Massachusetts 02053
(508) 533-______
5
<PAGE>
SUMMARY AND OVERVIEW
This is a summary of selected information from this document and does
not contain all the information that you need to know before making an informed
investment decision. To understand the stock offering fully, you should read
carefully this entire prospectus, including the consolidated financial
statements and the notes to the consolidated financial statements of Summit
Bank. References in this document to the "Bank," "we," "us," or "our" mean
Summit Bank. In certain instances where appropriate, "us" or "our" refers
collectively to Service Bancorp, Inc. and the Bank. References in this
prospectus to the "Stock Company" mean Service Bancorp, Inc., and references to
the "Mutual Company" mean Service Bancorp, MHC. References to the "Offering"
mean the subscription and if necessary, community offering described in this
prospectus.
The Companies
Service Bancorp, Inc.
81 Main Street
Medway, Massachusetts 02053
(508) 533-4343
After the Offering, the Stock Company will own 100% of the Bank's
common stock. Purchasers in the Offering will acquire in the aggregate 47% of
the Stock Company's common stock and the Mutual Company will acquire 53% of the
Stock Company's common stock. Although these percentages may change in the
future, the Mutual Company must always own at least 51% of the Stock Company's
common stock. See page __.
Summit Bank
81 Main Street
Medway, Massachusetts 02053
(508) 533-4343
The Bank is a community-oriented Massachusetts-chartered stock savings
bank. We provide financial services to individuals, families and small
businesses primarily in Norfolk County and surrounding markets in the greater
Boston metropolitan area. We are engaged primarily in the business of offering
various FDIC-insured retail deposits to customers through our five full-service
branch offices, and investing those deposits, together with funds generated from
operations and borrowings, in one- to four-family residential mortgage loans,
commercial real estate loans, construction and development loans, commercial
business loans, consumer loans, and mortgage-backed and other securities. At
March 31 , 1998, we had total assets of $131.2 million, total deposits of $108.1
million and total retained earnings of $9.9 million. See pages __ to __.
Description of the Mutual Holding Company Structure
The mutual holding company structure differs in significant respects
from the stock holding company structure that is typically used in a standard
mutual-to-stock conversion. In a standard conversion, a converting mutual
institution or its newly-formed holding company usually sells 100% of its common
stock in a stock offering. A savings institution that conducts a stock offering
using the mutual holding company structure sells less than 50% of its shares to
the public. As a result, control of the Stock Company will remain with the
Mutual Company.
Because the Mutual Company is a mutual corporation, its actions will
not necessarily always be in the best short-term interests of the Stock
Company's stockholders. In making business decisions, the Mutual Company's Board
of Trustees will consider a variety of constituencies, including the depositors
and employees of the Bank, and the communities in which the Bank operates. As
the majority stockholder of the Stock Company, the Mutual Company is also
interested in the continued success and profitability of the Bank and the Stock
Company. Consequently, the Mutual Company will act in a manner that furthers the
general interest of all of its constituencies, including, but not
6
<PAGE>
limited to, the interest of the stockholders of the Stock Company. The Mutual
Company believes that the interests are in many circumstances the same, such as
the increased profitability of the Stock Company and the Bank and continued
service to the communities in which the Bank operates.
Conversion of the Mutual Company to the Stock Form of Organization
Although the Mutual Company will own and control at least 51% of the
common stock of the Stock Company so long as the Mutual Company remains in
existence, the Mutual Company is permitted by law to convert to the stock form
of organization. Such a conversion transaction would be effected through a
merger of the Mutual Company into the Stock Company or the Bank concurrently
with the sale of the shares of the Stock Company's common stock held by the
Mutual Company in a subscription offering to qualifying depositors and others.
Regulations of the Division prohibit such a conversion for three years following
the Offering, subject to a waiver by the Division for supervisory reasons or for
compelling and valid business reasons established to the satisfaction of the
Division. Moreover, the Division has proposed, but has not yet adopted final
regulations governing the conversion of Massachusetts-chartered mutual holding
companies to stock form. Accordingly, there can be no assurance that the Mutual
Company will convert to stock form or of the conditions that the Division would
impose on a conversion transaction by the Mutual Company. The stock issuance
plan provides that any conversion transaction shall be fair and equitable to the
Stock Company's Minority Stockholders and establishes a formula for readjusting
the Minority Ownership Interest (if required by applicable banking regulators)
in the event the Mutual Company has significant assets (other than common stock
of the Stock Company) or the Mutual Company waives the receipt of dividends
declared by the Stock Company. Neither the Bank nor the Stock Company has any
plan to undertake a conversion transaction. If a conversion transaction does not
occur, the Mutual Company will continue to own at least 51% of the outstanding
common stock of the Stock Company and purchasers of the common stock in the
Offering will remain Minority Stockholders. Accordingly, investors should not
subscribe for shares of common stock in anticipation of a sale of control of the
Stock Company or the Bank. See "Risk Factors--Conversion of Mutual Company to
Stock Form."
The Stock Offering
The Stock Company is offering for sale between 799,000 and 1,081,000
shares of its common stock, for a price per share of $10.00. If market or
financial conditions change, we may increase the Offering to up to 1,243,150
shares without further notice to you. The number of shares that we sell in the
Offering is subject to approval of the Division and the FRB. We have engaged
Trident Securities, Inc. to assist us on a best efforts basis in selling the
common stock in the Offering. See pages ___ to ___.
Stock Pricing and Number of Shares to be Issued
The Bank's Board of Directors set the subscription price per share at
$10.00, the subscription price most commonly used in stock offerings involving
savings institutions. The number of shares of common stock issued in the
Offering is based on the independent valuation prepared by RP Financial, LC.,
Arlington, Virginia. The independent valuation states that as of May 29, 1998,
the estimated market value of the Stock Company after giving effect to the
reorganization ranged from a minimum of $17.0 million to a maximum of $23.0
million. Based on the independent valuation and the subscription price, the
number of shares of common stock that the Stock Company will issue will range
from 1.7 million shares to 2.3 million shares. The Board of Directors has
decided to offer for sale 47% of these shares, or between 799,000 shares and
1,081,000 shares, to qualifying depositors and others pursuant to this
prospectus. The Board determined to sell 47% of the stock in the Offering in
order to raise the maximum amount of proceeds while permitting the Stock Company
to issue additional shares of common stock in the future pursuant to the stock
award plan and stock option plan that the Stock Company intends to adopt no
sooner than six months after the Offering. The 53% of the shares of common stock
that are not sold in the Offering will be issued to the Mutual Company.
7
<PAGE>
Changes in the market and financial conditions and demand for the
common stock may result in an increase of up to 15% in the independent valuation
(to up to $26.5 million) and a corresponding increase in the maximum of the
Offering Range (to up to $12.4 million). We will not notify subscribers if the
maximum of the independent valuation and the maximum of the Offering Range are
increased by 15% or less. We will, however, notify subscribers if the maximum of
the independent valuation is increased by more than 15%, or if the minimum of
the independent valuation is decreased. The independent valuation is not a
recommendation as to the advisability of purchasing stock, and you should not
buy stock based on the independent valuation.
Stock Purchase Priorities
The Stock Company will offer shares of its common stock on the basis of
the following purchase priorities.
o Persons who had one or more deposit accounts with us with
aggregate balances of at least $50 on March 31, 1997. Any
remaining shares will be offered to:
o Persons who had one or more deposit accounts with us with
aggregate balances of at least $50 on June 30, 1998. Any
remaining shares will be offered to:
o The Bank's tax-qualified employee plans. Any remaining shares
will be offered to:
o The Bank's and the Mutual Company's employees, officers,
directors and trustees.
If the above persons do not subscribe for all of the shares of common
stock, the remaining shares will be offered to certain members of the general
public, with preference given to natural persons residing in the Massachusetts
towns of Franklin, Medway, Medfield and Millis.
Prohibition on Transfer of Subscription Rights
You may not sell or assign your subscription rights. Any transfer of
subscription rights is illegal and may subject you to sanctions by the
Commissioner or the FDIC. The Bank and the Stock Company will pursue any and all
legal and equitable remedies in the event they become aware of the transfer of
subscription rights and will not honor orders believed by them to involve the
transfer of such rights.
Termination of the Offering
The Subscription Offering will terminate at 12:00 noon, Massachusetts
time, on September __, 1998. If a Community Offering is held, it is expected to
begin immediately after the termination of the Subscription Offering, but may
begin during the Subscription Offering. The Stock Company may terminate any
Community Offering at any time prior to_____, 1998, without regulatory approval.
Benefits to Management from the Offering
We intend to implement certain stock benefit plans which may provide to
our full-time employees, officers, trustees and directors up to 22% of the
common stock issued in the Offering. Our full-time employees will participate in
our employee stock ownership plan, pursuant to which they will be awarded up to
8% of the common stock issued in the Offering. These shares will be awarded at
no cost to the recipients, and will have a value of $864,800, assuming shares
are sold in the Offering at the maximum of the Offering Range. We also intend to
implement a stock award plan and a stock option plan no earlier than six months
following completion of the Offering, which will benefit our officers, trustees
and directors. If we implement the stock award plan, certain officers, trustees
and directors will be awarded up to 4% of the common stock issued in the
Offering. These shares will be awarded at no cost to the recipients, and will
have a value of $432,400, assuming shares are sold in the Offering at the
8
<PAGE>
maximum of the Offering Range. If we implement a stock option plan, certain
officers, trustees and directors will be awarded options to purchase up to 10%
of the common stock issued in the Offering. The options, which will be awarded
at no cost to the recipient, will entitle the participant to purchase common
stock at a price per share equal to the then-current trading price of common
stock. However, the stock award plan and stock option plan may not be adopted
until at least six months after completion of the Offering and are subject to
shareholder approval.
The following table presents the dollar value of the shares to be
granted pursuant to the proposed benefit plans and the percentage of the Stock
Company's outstanding common stock which will be represented by these shares.
Value of Outstanding
Shares Granted(1) Common Stock
----------------- ------------
Benefit Plan:
Employee stock ownership plan ..... $864,800 3.76%
Stock award plan .................. 432,400 1.88
Stock option plan ................. --(2) 4.70
------------- -----
$ 1,297,200 10.34%
============= =====
- -----------
(1) Assumes shares are granted at $10 per share and that shares are sold in the
Offering at the maximum of the Offering Range.
(2) Recipients of stock options realize value only in the event of an increase
in the price of the common stock of the Stock Company following the date of
grant of the stock options.
Each director of the Stock Company will receive an annual $1,000
retainer fee for his service on the Stock Company's board of directors. In
addition, the Bank intends to enter into an employment agreement with its
President and Chief Executive Officer following completion of the Offering. See
pages__ to__.
Use of the Proceeds Raised from the Sale of Common Stock
The Stock Company will use the net proceeds from the Offering as
follows. The percentages we use are estimates:
o 50% will be contributed to the Bank in exchange for 100% of the
capital stock of the Bank.
o 8% will be loaned to the ESOP to fund its purchase of common
stock.
o 42% will be retained by the Stock Company as a possible source of
funds for the payment of dividends to shareholders, the
repurchase of stock, and for other general corporate purposes.
The proceeds received by the Bank will be available for expansion of
our retail banking services through new branch openings or deposit or branch
acquisitions, acquisitions of other financial institutions, new loan
originations, and the purchase of investment and mortgage-backed securities, in
addition to general corporate purposes. See pages __ and __.
9
<PAGE>
Dividends
The Board of Directors of the Stock Company currently does not intend
to pay cash dividends on its common stock. While the Board of Directors may
consider a policy of paying cash dividends on its common stock in the future,
there is no assurance that cash dividends will ever be paid, or, if paid, what
the amount of dividends will be, or whether such dividends, once paid, will
continue to be paid. For a discussion of the Stock Company's anticipated
dividend policy, including restrictions on its ability to pay dividends, see
"Dividend Policy."
Market for the Common Stock
We have applied to have the Stock Company's common stock listed on the
Nasdaq SmallCap Market under the symbol "SUBC." The requirements for listing
include a minimum number of publicly traded shares, a minimum market value of
the Stock Company's common stock, and a minimum number of market makers and
record holders. Trident Securities, Inc. has indicated its intention to make a
market in the common stock, and based on our analysis of the results of recent
stock offerings, we anticipate that the Stock Company will satisfy these
requirements. If we are unable, for any reason, to list the common stock on the
Nasdaq SmallCap Market, or to continue to be eligible for listing, then we
intend to list the common stock on the over-the-counter market with quotations
available on the OTC Bulletin Board, if we qualify under their listing criteria.
Risk Factors
The purchase of the Stock Company's common stock involves a substantial
degree of risk. Prospective stockholders should carefully consider the matters
set forth in this prospectus, including those set forth in "Risk Factors."
10
<PAGE>
SELECTED FINANCIAL AND OTHER DATA
The following information at and for the years ended June 30, 1997 and
1996 is derived from the audited consolidated financial statements of the Bank.
The information at and for the nine months ended March 31, 1998 and 1997 is
based on the unaudited consolidated financial statements of the Bank, which
management believes reflect all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial information as of such
dates and for such periods. The summary of operations and key operating ratios
and other data for the nine months ended March 31, 1998 and 1997 do not
necessarily mean that results for any other period will be similar. The
information is a summary only and you should read it in conjunction with the
Consolidated Financial Statements and Notes of the Bank beginning on page F-1.
Selected Financial Data
June 30,
March 31, ----------------------
1998 1997 1996
---- ---- ----
(Dollars in Thousands)
Total assets ......................... $131,204 $104,878 $ 90,354
Loans receivable, net ................ 72,197 66,934 59,667
Short-term investments ............... 6,400 6,305 2,597
Mortgage-backed securities--
available for sale ................. 7,305 2,745 2,076
Investment securities--
available for sale (1) ............. 37,603 22,989 19,181
Deposits ............................. 108,056 92,897 81,189
Total borrowings ..................... 12,404 2,622 369
Retained earnings .................... 9,890 8,695 7,421
Summary of Operations
Nine Months Ended Years Ended
March 31, June 30,
----------------- -----------------
1998 1997 1997 1996
---- ---- ---- ----
(Dollars in Thousands)
Total interest income .............. $6,309 $5,147 $7,037 $6,102
Total interest expense ............. 2,972 2,324 3,174 2,746
------ ------ ------ ------
Net interest income ............. 3,337 2,823 3,863 3,356
Provision for loan losses .......... 75 35 35 93
------ ------ ------ ------
Net interest income, after
provision for loan losses ........ 3,262 2,788 3,828 3,263
Fees and service charges ........... 312 295 406 388
Gain on sales of loans and
securities ....................... 719 369 493 308
Other non-interest income .......... 44 46 60 78
------ ------ ------ ------
Total non-interest income .......... 1,075 710 959 774
Total non-interest expense ......... 2,861 2,212 3,094 2,735
------ ------ ------ ------
Income before income taxes ......... 1,476 1,286 1,693 1,302
Income tax provision ............... 521 477 611 501
------ ------ ------ ------
Net income ......................... $ 955 $ 809 $1,082 $ 801
====== ====== ====== ======
- ----------
(1) Includes certificates of deposit and FHLB stock, which are not available
for sale.
11
<PAGE>
Key Operating Ratios and Other Data
<TABLE>
<CAPTION>
At or for the At or for the
Nine Months Ended Years Ended
March 31, June 30,
----------------- ------------------
1998 1997 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Performance Ratios (1):
Return on average assets ........ 1.12% 1.15% 1.13% 0.97%
Return on average retained
earnings ...................... 13.64% 13.73% 13.58% 11.35%
Average interest rate spread
during period ................. 3.71% 3.84% 3.86% 3.99%
Net interest margin (2) ......... 4.15% 4.27% 4.29% 4.34%
Ratio of operating expense to
average assets ................ 3.34% 3.15% 3.24% 3.31%
Ratio of average interest-
earning assets to average
interest-bearing liabilities ... 111.82% 112.48% 112.38% 109.81%
Efficiency ratio (3) ............ 64.85% 62.61% 64.16% 66.22%
Asset Quality Ratios:
Non-accrual loans and other
real estate owned to total
assets ........................ 0.26% 0.69% 0.22% 0.99%
Allowance for loan losses as
a percent of non-accrual loans 163.27% 220.00% 246.11% 52.28%
Allowance for loan losses as
a percent of loans
receivable, net ............... 0.77% 0.84% 0.71% 0.79%
Capital Ratios:
Retained earnings to total assets 7.54% 8.10% 8.29% 8.21%
Average retained earnings to
average assets ................ 8.18% 8.39% 8.33% 8.55%
Other Data:
Number of full-service offices .. 5 4 4 4
Number of deposit accounts ...... 16,306 15,379 15,598 14,830
Number of loans outstanding ..... 1,649 1,500 1,557 1,410
</TABLE>
- -----------
(1) Ratios for the nine month periods have been annualized where applicable.
(2) Net interest income divided by average interest-earning assets.
(3) Non-interest expense divided by the sum of net interest income and
non-interest income.
12
<PAGE>
RECENT DEVELOPMENTS
The following information at and for the year ended June 30, 1997 is
derived from the audited consolidated financial statements of the Bank. The
information for the three months ended June 30, 1998 and 1997, at and for the
twelve months ended June 30, 1998 and at March 31, 1998 is based on the
unaudited consolidated financial statements of the Bank, which management
believes reflect all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial information as of such
dates and for such periods. The summary of operations and key operating ratios
and other data for the three months ended June 30, 1998 and 1997 do not
necessarily mean that results for any other period will be similar. The
information is a summary only and you should read it in conjunction with the
Consolidated Financial Statements and Notes of the Bank beginning on page F-1.
Selected Consolidated Financial Information
June 30, March 31, June 30,
1998 1998 1997
---- ---- ----
(Dollars in Thousands)
Total assets ......................... $138,952 $131,204 $104,878
Loans receivable, net ................ 76,735 72,197 66,934
Short-term investments ............... 11,931 6,400 6,305
Mortgage-backed securities--
available for sale ................. 5,980 7,305 2,745
Investment securities--
available for sale (1) ............. 36,422 37,603 22,989
Deposits ............................. 112,247 108,056 92,897
Total borrowings ..................... 14,562 12,404 2,622
Retained earnings .................... 10,123 9,890 8,695
Three Months Ended Years Ended
June 30, June 30,
----------------- -----------------
1998 1997 1998 1997
---- ---- ---- ----
(Dollars in Thousands)
Total interest income .............. $2,328 $1,890 $8,636 $7,037
Total interest expense ............. 1,145 850 4,116 3,174
------ ------ ------ ------
Net interest income ............. 1,183 1,040 4,520 3,863
Provision for loan losses .......... 25 -- 100 35
------ ------ ------ ------
Net interest income, after
provision for loan losses ........ 1,158 1,040 4,420 3,828
Fees and service charges ........... 117 110 430 406
Gain on sales of loans and
investment securities, net ....... 114 124 833 493
Other non-interest income .......... 15 14 58 60
------ ------ ------ ------
Total non-interest income .......... 246 248 1,321 959
Total non-interest expense ......... 1,047 881 3,908 3,094
------ ------ ------ ------
Income before income taxes ......... 357 407 1,833 1,693
Income tax provision ............... 111 133 632 611
------ ------ ------ ------
Net income ......................... $ 246 $ 274 $1,201 $1,082
====== ====== ====== ======
- ----------
(1) Includes certificates of deposit and FHLB stock, which are not available
for sale.
13
<PAGE>
Key Operating Ratios and Other Data:
At or for the At or for the
Three Months Ended Years Ended
June 30, June 30,
------------------ ---------------
1998 1997 1998 1997
---- ---- ---- ----
Performance Ratios(1):
Return on average assets ........... 0.76% 1.08% 1.02% 1.13%
Return on average retained
earnings .......................... 9.92% 13.20% 12.80% 13.58%
Average interest rate spread
during period ..................... 3.38% 3.92% 3.59% 3.86%
Net interest margin(2) ............. 3.85% 4.35% 4.07% 4.29%
Ratio of operating expense
to average assets ................. 3.22% 3.47% 3.31% 3.24%
Ratio of average interest-
earning assets to average
interest-bearing liabilities ...... 112.63% 112.06% 112.38% 112.38%
Efficiency ratio(3) ................ 73.27% 68.40% 66.91% 64.16%
Asset Quality Ratios:
Non-performing assets to
total assets at end of period ..... 0.21% 0.22% 0.21% 0.22%
Allowance for loan losses to
non-performing loans .............. 199.65% 246.11% 199.65% 246.11%
Allowance for loan losses to
loans receivable, net ............. 0.75% 0.71% 0.75% 0.71%
Capital Ratios:
Retained earnings to total
assets at end of period ........... 7.28% 8.29% 7.28% 8.29%
Average retained earnings
to average assets ................. 7.63% 8.16% 7.94% 8.33%
Other Data:
Number of full-service offices ..... 5 4 5 4
- ----------
(1) Ratios for the three month periods have been annualized, where applicable.
(2) Net interest income divided by average interest-earning assets.
(3) Non-interest expense divided by the sum of net interest income and
non-interest income.
Comparison of Financial Condition at June 30, 1998 and March 31, 1998
Total assets increased by $7.8 million, or 5.9%, from $131.2 million at
March 31, 1998 to $139.0 million at June 30, 1998. This growth was due primarily
to a $5.5 million, or 86.4%, increase in short-term investments and a $4.5
million, or 6.3%, increase in net loans receivable. These increases were
partially offset by decreases of $1.3 million, or 18.1%, and $1.2 million, or
3.1%, in mortgage-backed securities and investment securities, respectively.
This asset growth was funded primarily by a $4.2 million, or 3.9%, increase in
deposits and a $2.2 million, or 17.4%, increase in total borrowings at June 30,
1998 as compared to March 31, 1998.
The net increase in loans resulted from increased commercial real
estate loan originations reflecting strong economic growth in the Bank's primary
lending area. In addition, the Bank purchased $3.4 million in residential
mortgages in the New England area from another New England financial
institution. From March 31, 1998 to June 30, 1998, commercial real estate loans
increased by $2.2 million, or 18.1%, residential mortgage loans increased by
$1.5 million, or 3.2%, construction or development loans increased by $350,000,
or 9.1%, and commercial business loans increased by $737,000, or 21.4%. These
increases were partially offset by a modest reduction in home equity loans of
$262,000, or 5.5%, from March 31, 1998 to June 30, 1998. The Bank funded these
loans primarily with
14
<PAGE>
deposit growth and FHLB advances as management sought to increase net interest
income by taking advantage of the favorable spread between the yield on these
purchased mortgages and the cost of the FHLB advances.
At June 30, 1998, the Bank's total investment securities were $36.4
million, a decrease from the Bank's total investment securities of $37.6 million
at March 31, 1998. All of such investment securities are classified by the Bank
as available for sale. The decrease in the securities portfolio was attributable
primarily to $2.7 million of bond call redemptions during the period, which were
partially offset by the net increase of $811,000 in equity securities. In
addition, short-term investments increased $5.5 million to $11.9 million at June
30, 1998 compared to $6.4 million at March 31, 1998, while mortgage-backed
securities increased by $1.3 million to $6.0 million over the same period
principally due to the larger than normal prepayment activity within the
mortgage pools during the three month period. The Bank constantly monitors its
liquidity position and invests any excess funds in loan originations and in the
purchase of longer and higher yielding investment securities to increase its net
interest income.
Total deposits at June 30, 1998 were $112.2 million, an increase of
$4.2 million, or 3.9%, compared to $108.1 million at March 31, 1998. The
increase in deposits was attributable primarily to increases in regular savings,
NOW accounts and certificate of deposit accounts, the balances of which
increased by $705,000, or 3.1%, $1.2 million, or 6.9%, and $1.7 million, or
3.4%, respectively, from March 31, 1998 to June 30, l998. Total borrowed funds
increased to $14.6 million at June 30, 1998 compared to $12.4 million at March
31, 1998. The increases in total deposits and in borrowed funds were utilized to
fund the increases in total assets described above.
The Bank's retained earnings increased by $233,000, or 2.4%, to $10.1
million at June 30, 1998 compared to $9.9 million at March 31, 1998. The
increase in retained earnings resulted from net income of $246,000 for the three
months ended June 30, 1998, while unrealized gains (net of taxes) on securities
available for sale decreased by $13,000. The decrease in unrealized gains on
securities available was attributable in part to the sale of certain equity
securities within the investment portfolio during the three month period.
Comparison of Financial Condition at June 30, 1998 and June 30, 1997
Total assets increased by $34.1 million, or 32.5%, from $104.9 million
at June 30, 1997 to $139.0 million at June 30, 1998. This growth was due
primarily to a $13.4 million, or 58.4%, increase in investment securities, a
$5.6 million, or 89.2%, increase in short-term investments, a $9.8 million, or
14.7%, increase in net loans receivable and a $3.2 million, or 117.8%, increase
in mortgage-backed securities. This asset growth was funded primarily by a $19.4
million, or 20.8%, increase in deposits and a $11.9 million, or 455.4%, increase
in total borrowings at June 30, 1998 as compared to June 30, 1997.
The net increase in loans resulted from increased commercial real
estate loan originations reflecting strong economic growth in the Bank's primary
lending area. In addition, the Bank purchased $5.9 million in residential
mortgages in the New England area from New England financial institutions,
thereby increasing the Bank's total purchased mortgage portfolio by $1.8
million. From June 30, 1997 to June 30, 1998, commercial real estate loans
increased by $5.2 million, or 57.1%, residential mortgage loans increased $1.3
million, or 2.7%, construction or development loans increased by $1.3 million,
or 46.3%, and commercial business loans increased by $1.6 million, or 65.0%. In
addition, from June 30, 1997 to June 30, 1998, consumer loans increased by
$485,000, or 24.7%, while home equity loans decreased slightly by $60,000, or
1.3%.
At June 30, 1998, the Bank's total investment securities were $36.4
million, an increase from $23.0 million at June 30, 1997. In addition,
short-term investments increased $5.6 million to $11.9 million at June 30, 1998
compared to June 30, 1997, while mortgage-backed securities increased by $3.2
million to $6.0 million over the same period. The increases in investment
securities and mortgage-backed securities from June 30, 1997 to June 30, 1998
were funded largely by FHLB advances, which increased to $14.6 million at June
30, 1998 compared to $2.6 million at June 30, 1997, as management sought to
increase net interest income by taking advantage of the favorable spread
15
<PAGE>
between the yield on the securities and the cost of the FHLB advances. If and to
the extent that the FHLB advances are called, management may sell such
securities to fund growth in the loan portfolio to the extent necessary.
Total deposits at June 30, 1998 were $112.2 million, an increase of
$19.4 million, or 20.8%, compared to $92.9 million at June 30, 1997. The
increase in deposits was attributable primarily to demand deposits, NOW accounts
and certificate of deposit accounts, the balances of which increased by $3.9
million, or 58.5%, $4.4 million, or 32.7%, and $8.9 million, or 20.9%,
respectively, for June 30, 1998 as compared to June 30, 1997. Total borrowed
funds increased to $14.6 million at June 30, 1998 compared to $2.6 million at
June 30, 1997. The increases in total deposits and in borrowed funds were
utilized to fund the increases in total assets described above.
The Bank's retained earnings increased by $1.4 million, or 16.4%, to
$10.1 million at June 30, 1998 compared to $8.7 million at June 30, 1997. The
increase in retained earnings resulted from net income of $1.2 million for the
twelve months ended June 30, 1998 and a $227,000 increase in unrealized gains
(net of taxes) on securities available for sale. The increase in unrealized
gains on securities available was attributable, in part, to continued strength
in U.S. equities markets generally; there can be no assurance that such gains
will continue in future periods.
Comparison of Operating Results for the Three Months Ended June 30, 1998 and
June 30, 1997
General. Net income decreased by $28,000, or 10.2%, from $274,000 for
the three months ended June 30, 1997 to $246,000 for the three months ended June
30, l998. This decrease was attributable to an increase of $166,000 in
noninterest expense, an increase of $25,000 in the provision for loan losses and
a decrease of $10,000 in the gain on the sale of loans and investment securities
between periods, which was partially offset by an increase in net interest
income of $143,000 for the same period.
Interest Income. Interest income for the three months ended June 30,
l998 was $2.3 million compared to $1.9 million for the three months ended June
30, 1997. The increase was attributable to a substantial increase in average
interest-earning assets of $27.3 million, or 28.5% for the three months ended
June 30, 1998 compared to the earlier year period, which more than offset the
reduction in the average yield on interest-earning assets from 7.90% for the
three months ended June 30, 1997 to 7.57% for the three months ended June 30,
1998. This yield decrease was caused primarily by the greater increase in
lower-yielding investment securities over total net loans between periods. The
principal areas of growth in average balances related to increases in loans
receivable (up $8.2 million, or 12.5%) and in investment securities, short-term
investments, and mortgage-backed securities, combined (up $19.0 million, or
64.0%). The increase in loans receivable reflected loan demand in the Bank's
primary lending area, and the increase in the average balance of investment
securities reflected management's decision to increase liquidity in anticipation
of further growth in the Bank's primary lending area.
Interest Expense. Interest expense for the three months ended June 30,
1998 was $1.1 million compared to $850,000 for the three months ended June 30,
1997, an increase of $295,000, or 34.7%. The increase resulted from both a
higher average balance of interest-bearing liabilities (which increased by $23.8
million, or 27.8%) as well as an increase in the average rate paid for funds to
4.20% for the three months ended June 30, 1998 compared to 3.98% for the three
months ended June 30, 1997. The increase in average interest-bearing deposit
balances reflected increases in both transaction accounts and certificate
accounts. In particular, the average balance of certificate accounts increased
to $50.4 million for the three months ended June 30, 1998 compared to $42.0
million for the earlier three month period, as the Bank increased the rates paid
on such accounts to fund asset growth. The Bank also expanded its use of
borrowings from the FHLB both to fund asset growth as well as to facilitate
management of interest rate risk and may continue to do so in the future for
both purposes. Interest expense on borrowed funds increased for the three months
ended June 30, 1998 compared to the earlier period, reflecting increased average
balances of such borrowings, notwithstanding a reduction in the rate paid on
such borrowings to 5.47% for the three months ended June 30, 1998 compared to
5.77% for the three months ended June 30, 1997.
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Provision for Loan Losses. The Bank had a provision for loan losses of
$25,000 for the three months ended June 30, 1998. No such provision was made for
the comparable period in 1997. This increase reflected a desire by management to
keep the allowance for loan losses at a level to properly match loan growth and
to reset general reserves for certain loan categories. The ratio of non-accruing
loans and other real estate owned to total assets at June 30, 1998 was 0.21%
compared to 0.22% at June 30, 1997. The allowance for loan losses was $577,000
at June 30, 1998 and $475,000 at June 30, 1997, or 0.75% and 0.71% of net loans
receivable, respectively. During the three months ended June 30, 1998, the Bank
experienced net charge-offs of $8,000, compared to net charge-offs of $64,000
for the three months ended June 30, 1997. While management believes that, based
on information currently available, the Bank's allowance for loan losses is
sufficient to cover losses inherent in its loan portfolio at this time, no
assurances can be given that the level of the Bank's allowance will be
sufficient to cover future loan losses incurred by the Bank.
Non-interest Income. Non-interest income is comprised of fees and
charges for bank services, gains or losses from the sale of assets, other real
estate owned activity and other income resulting from miscellaneous
transactions. Total noninterest income was $246,000 for the three months ended
June 30, 1998 compared to $248,000 for the three months ended June 30, 1997.
Gains on sales of loans and investment securities decreased by $10,000 between
the two periods, and this decrease was partially offset by a $7,000 increase in
fees and sales charges.
Non-interest Expense. Non-interest expense increased by $166,000 to
$1.0 million for the three months ended June 30, 1998 compared to $881,000 for
the three months ended June 30, 1997. Of this increase, $80,000 related to
salaries and benefits, which rose 19.5%. The higher level of compensation and
employee benefits was attributable primarily to the opening of a new
full-service branch office in Franklin, Massachusetts during August 1997 as well
as increased pension, group health and training expenses. Other non-interest
expenses increased $86,000, or 18.4%, to $554, 000 for the three months ended
June 30, 1998 compared to the earlier year period primarily due to increases in
advertising and data processing expenses to promote and process new bank
products and services, increases in occupancy and equipment expenses
attributable to the new full-service branch office in Franklin, Massachusetts,
and increases in consulting fees for the determination of ways to improve
bottom-line performance by improving income or better managing operating
expenses.
Income Taxes. Income tax expense for the three months ended June 30,
1998 was $111,000, compared to $133,000 for the three months ended June 30,
1997, resulting in effective tax rates of 31.1% and 32.7% for the respective
periods. The decrease in the effective tax rate reflects the increased
utilization by the Bank of a securities investment subsidiary to substantially
reduce state income taxes. Offsetting this decrease was the Bank's one-time
$53,000 contribution to its newly formed charitable foundation during the three
months ended June 30, 1997, which reduced the Bank's effective tax rate for that
period.
Comparison of Operating Results for the Fiscal Years Ended June 30, 1998 and
1997
General. Net income increased by $119,000, or 11.0%, from $1.1 million
for the twelve months ended June 30, 1997 ("Fiscal 1997") to $1.2 million for
the twelve months ended June 30, 1998 ("Fiscal 1998"). The improvement was
attributable to higher net interest income of $4.5 million in Fiscal 1998
(compared to $3.9 million in Fiscal 1997) and a $833,000 gain on the sale of
loans and investment securities in Fiscal 1998 (compared to a $493,000 gain in
Fiscal 1997). These improvements more than offset the increase of $814,000, or
26.3%, in total non-interest expense in Fiscal 1998 compared to Fiscal 1997.
Interest Income. Interest income for Fiscal 1998 was $8.6 million
compared to $7.0 million for Fiscal 1997. The increase was attributable to a
substantial increase in average interest-earning assets of $21.4 million, or
23.8%, for Fiscal 1998 compared to Fiscal 1997. The yield on average earning
assets decreased slightly from 7.82% in Fiscal 1997 to 7.74% in Fiscal 1998. The
principal areas of growth in average balances related to loans receivable (up
$7.8 million, or 12.4%) and investment securities, short-term investments, and
mortgaged-backed securities combined (up $13.6 million, or 50.3%). The increase
in loans receivable reflected loan demand in the Bank's primary lending area,
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and the increase in the average balance of investment securities reflected
management's decision to increase liquidity in anticipation of further growth in
the Bank's primary lending area.
Interest Expense. Interest expense for Fiscal 1998 was $4.1 million
compared to $3.2 million for Fiscal 1997, an increase of $942,000, or 29.7%. The
increase resulted from both a higher average balance of interest-bearing
liabilities (which increased by $19.0 million, or 23.8%) as well as an increase
in the average rate paid for funds to 4.15% for Fiscal 1998 compared to 3.96%
for Fiscal 1997. The increase in average interest-bearing deposit balances
reflected increases in both transaction accounts and certificate accounts. In
particular, the average balance of certificate accounts increased to $48.3
million for Fiscal 1998 compared to $39.0 million for Fiscal 1997. The increase
in certificate accounts was caused by the Bank's increasing the rates paid on
such accounts to fund asset growth. Another source of asset funding was FHLB
advances, the average balance of which increased $5.4 million from $2.2 million
for Fiscal 1997 to $7.6 million for Fiscal 1998. The average rate paid on these
borrowings decreased from 5.74% for Fiscal 1997 to 5.56% for Fiscal 1998.
Provision for Loan Losses. The Bank had a provision for loan losses of
$100,000 for Fiscal 1998 compared to $35,000 for Fiscal 1997. This increase
reflected a desire by management to keep the allowance for loan losses at a
level to properly match loan growth and to reset general reserves for certain
loan categories. The ratio of non-accruing loans and other real estate owned to
total assets at June 30, 1998 was 0.21% compared to 0.22% at June 30, 1997. The
allowance for loan losses was $577,000 at June 30, 1998 and $475,000 at June 30,
1997, or 0.75% and 0.71% of net loans receivable, respectively. During Fiscal
1998, the Bank experienced net recoveries of $2,000, compared to net charge-offs
of $30,000 for Fiscal 1997. While management believes that, based on information
currently available, the Bank's allowance for loan losses is sufficient to cover
losses inherent in its loan portfolio at this time, no assurances can be given
that the level of the Bank's allowance will be sufficient to cover future loan
losses incurred by the Bank.
Non-interest Income. Non-interest income is comprised of fees and
charges for bank services, gains or losses from the sale of assets, other real
estate owned activity and other income resulting from miscellaneous
transactions. Total non-interest income was $1.3 million for Fiscal 1998
compared to $959,000 for Fiscal 1997. The increase resulted primarily from
$833,000 in gains on sales of loans, mortgage-backed securities and investment
securities for Fiscal 1998 as compared to $493,000 for the Fiscal 1997. All
other non-interest income increased $22,000.
Non-interest Expense. Non-interest expense increased by $814,000 to
$3.9 million for Fiscal 1998 compared to $3.l million for Fiscal 1997. Of this
increase, $330,000 related to salaries and benefits, which rose 20.4%. The
higher level of compensation and employee benefits was attributable primarily to
the opening of a new full-service branch office in Franklin, Massachusetts
during August 1997 as well as increased pension, group health and training
expenses. Other non-interest expenses increased $484,000, or 32.8%, to $2.0
million for Fiscal l998 compared to Fiscal 1997 primarily due to increases in
advertising and data processing expenses to promote and process new bank
products and services, and increases in occupancy and equipment expenses
attributable to the new full-service branch office in Franklin, Massachusetts.
Income Taxes. Income tax expense for Fiscal 1998 was $632,000 compared
to $611,000 for Fiscal 1997, resulting in effective tax rates of 34.5% and 36.1%
for the respective periods. The lower effective tax rate reflects the Bank's
utilizing securities investment subsidiaries to substantially reduce state
income taxes.
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RISK FACTORS
In addition to the other information in this prospectus, you should
consider carefully the following risk factors in evaluating an investment in the
common stock.
Growth of the Bank's Commercial Business and Commercial Real Estate Lending
In recent years, the Bank's lending activities have increasingly
emphasized commercial business and commercial real estate lending to take
advantage of the demand for such loans in the Bank's primary lending area. At
March 31, 1998, the Bank's portfolio of commercial real estate mortgage loans
totaled $12.1 million, or 16.67% of gross loans, which represented an increase
in this type of loan of $6.3 million, or 107.3%, since June 30, 1996.
Additionally, at March 31, 1998, the Bank's portfolio of commercial business
loans totaled $3.5 million, or 4.84% of gross loans, which represented an
increase in this type of loan of $830,000, or 30.8%, since June 30, 1996. At
March 31, 1998, the Bank had an additional $2.8 million of outstanding
commitments to fund commercial real estate and commercial business loans. See
"Business of the Bank--Lending Activities." These loans generally have larger
principal amounts and a greater degree of risk than one- to four-family
residential mortgage loans. Moreover, many of the Bank's borrowers have more
than one commercial real estate mortgage loan or commercial business loan
outstanding with the Bank.
Commercial real estate mortgage loans and commercial business loans are
generally viewed as having greater credit risk and requiring substantially
greater oversight efforts than one- to four-family residential mortgage loans.
The repayment of such loans generally depends, in large part, on sufficient
income from the property to cover operating expenses and debt service. Economic
events and government regulations, which are outside the control of the borrower
or lender, may impact the value of the properties securing such loans or the
future cash flow of the affected properties. See "Business of the
Bank--Delinquent Loans, Other Real Estate Owned and Classified Assets."
Mutual Company Control of Stock Company and Other Anti-Takeover Provisions
The mutual holding company structure and Massachusetts regulations
generally restricting (i) conversion of a mutual holding company to stock form
for a period of three years following a minority stock offering and (ii) the
acquisition of control of a fully-converted savings bank for three years after
conversion, create substantial impediments to any change of control of the Stock
Company, or the Mutual Company.
Mutual Holding Company Structure. Under Massachusetts law, at least 51%
of the Stock Company's voting shares must be owned by the Mutual Company, and
the Mutual Company will be controlled by its Board of Trustees. As the majority
stockholder of the Stock Company, the Mutual Company will be able to elect all
of the directors of the Stock Company and direct the affairs and business
operations of the Stock Company. The Mutual Company will be able to prevent any
challenge to the ownership or control of the Stock Company by Minority
Stockholders. Accordingly, the purchasers of the common stock in the Offering
will be Minority Stockholders of the Stock Company and will have limited
influence on the election of directors or the affairs of the Stock Company, and
will have no control over the affairs of the Mutual Company. No assurance can be
given that the Mutual Company will not take actions that may be considered
adverse to the interests of Minority Stockholders.
Provisions in the Stock Company's and the Bank's Governing Instruments.
Certain provisions of the Stock Company's Articles of Organization and Bylaws
(particularly a provision limiting voting rights), the Bank's Charter and
Bylaws, as well as certain federal and state regulations, will assist the Stock
Company in maintaining its status as an independent, publicly-owned corporation.
These provisions provide for, among other things, a supermajority vote to
approve certain transactions and amend the charter, the staggered election of
members of the boards of directors so that no more than one-third of the
directors are elected annually, no cumulative voting for the election of
directors, limits on the calling of special meetings of stockholders and uniform
price provisions for certain business combinations. Moreover, the regulations of
the Division prohibit, for a period of three years following the date of a
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conversion, offers to acquire or the acquisition of beneficial ownership of more
than 10% of the outstanding stock of a stock savings bank. Any person, or group
acting in concert, violating this restriction may not vote the Bank's or the
Stock Company's securities in excess of the designated percentage. These
provisions in the Bank's and the Stock Company's governing instruments may
discourage potential proxy contests and other potential takeover attempts,
particularly those which have not been negotiated with the Board of Directors,
and thus, generally may serve to perpetuate current management. See
"Restrictions on Acquisition of the Stock Company and the Bank."
Restrictions on Conversion to Stock Form. Massachusetts regulations
prohibit a mutual holding company from converting to stock form for at least
three years following the completion of its minority stock offering unless the
Division waives the restriction for supervisory reasons or for compelling and
valid business reasons established to the satisfaction of the Division.
Moreover, the mutual-to-stock conversion regulations of the Division prohibit
the sale of control of a converted savings bank for a period of three years
following conversion unless waived by the Division. Accordingly, prospective
investors should not purchase the common stock if they are doing so in
anticipation of a sale of control of the Stock Holding Company.
Uncertainty as to Future Growth Opportunities
The Bank's total assets have increased by 100.7% since June 30, 1993,
and the Bank intends to continue to grow in the future by focusing on mortgage
and small business lending in its market area. The Bank also intends to grow by
establishing new branches or by acquiring other financial institutions or
branches. The Bank's ability to grow through selective acquisitions of other
financial institutions or branches of such institutions will depend on
successfully identifying, acquiring and integrating such institutions or
branches. Moreover, the Bank's ability to increase its origination of real
estate mortgage and commercial business loans will depend on market conditions
in the Bank's primary lending area. There can be no assurance the Bank will be
able to generate loan growth internally or identify attractive acquisition
candidates, acquire such candidates on favorable terms or successfully integrate
any acquired institutions or branches into the Bank. Neither the Stock Company
nor the Bank has any specific plans, arrangements or understandings regarding
any such expansions or acquisitions at this time, nor have criteria been
established to identify potential candidates for acquisition.
Sensitivity to Changes in Interest Rates
The Bank's profitability, like that of most financial institutions,
depends to a large extent upon its net interest income, which is the difference
between its interest income on interest-earning assets, such as loans and
securities, and its interest expense on interest-bearing liabilities, such as
deposits and borrowed funds. Accordingly, the Bank's results of operations and
financial condition depend largely on movements in market interest rates and its
ability to manage its assets and liabilities in response to such movements.
The Bank tries to manage its interest rate risk exposure by (1)
originating and retaining adjustable-rate loans while generally selling
long-term one- to four-family fixed-rate loans in the secondary market, (2)
originating fixed-rate commercial real estate loans and matching the maturities
of these loans with long-term FHLB borrowings, (3) investing in debt securities
with relatively short maturities or call dates, (4) classifying all of the
Bank's investment portfolio as available for sale to provide greater flexibility
to liquidate assets in response to changes in interest rates, and (5)
maintaining a high concentration of"core deposits" which typically have lower
yields and are less interest rate sensitive. The Bank offers a one-year
adjustable rate mortgage loan that reprices annually, a three-year adjustable
rate mortgage loan that reprices every third year, and a "5-1" loan (for first
time home buyers) that has a fixed interest rate for the first five years and
adjusts annually thereafter. See "Business of the Bank--Lending Activities--Loan
Maturity and Repricing". While management expects that adjustable rate mortgage
loans will increase the yield on the Bank's loan portfolio in a rising interest
rate environment, the larger mortgage payments required from adjustable-rate
borrowers in the event of higher interest rates could lead to an increase in
defaults by such borrowers.
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At March 31, 1998, $65.8 million, or 59.7%, of the Bank's
interest-bearing deposits and borrowed funds mature or reprice within one year
or less, and $54.0 million, or 43.8% of the Bank's interest-earning assets
mature or reprice within one year or less. As a result, at March 31, 1998, the
Bank's cumulative one-year gap position, the difference between the amount of
interest-earning assets maturing or repricing within one year and
interest-bearing liabilities maturing or repricing within one year, was a
negative 8.99%. Because 39.1% of the Bank's total deposits consisted of
certificates of deposit with maturities of one year or less at March 31, 1998,
the Bank's cost of funds is likely to increase at a greater rate in a rising
interest rate environment than if the Bank had a greater percentage of its
deposits in transaction accounts (NOW, savings and money market deposit
accounts). Accordingly, if market interest rates increase, the Bank's cost of
funds may increase more rapidly than the yield on its loans, thereby adversely
affecting the Bank's interest rate spread, net interest income and net income.
Geographic Concentration of Loans
The Bank's lending area is concentrated primarily in Norfolk County and
nearby surrounding markets in the greater Boston metropolitan area (the "primary
lending area"). Accordingly, the asset quality of the Bank's loan portfolio is
largely dependent upon the economy and unemployment rate in this area. These
factors are affected to a great extent by the success of companies operating in
the area. The success of these companies in the past few years has helped to
keep the economy stable. Their continued success, however, is dependent on the
strength of national and international financial markets, both of which are
subject to rapid change. A downturn in the economy in the Bank's primary lending
area would likely adversely affect the Bank's operations. See "Business of the
Bank--Market Area" and "--Competition."
Potential Increased Compensation Expenses after the Reorganization and Offering
In November 1993, the American Institute of Certified Public
Accountants issued Statement of Position 93-6 entitled "Employers' Accounting
for Employee Stock Ownership Plans," which requires an employer to record
compensation expense in an amount equal to the fair market value of shares
committed to be released to employees from an employee stock ownership plan,
instead of an amount equal to the cost basis of such shares. If the shares of
common stock appreciate in value over time, this will result in increased
compensation expense with respect to the employee stock ownership plan that the
Stock Company intends to establish. It is impossible to determine at this time
the extent of such impact on future net income. However, if for example, the
ESOP purchases 8% of the common stock at the adjusted maximum of the Offering
Range, and such shares are expensed on average at $15 per share over a ten year
period, the annual compensation expenses associated with the ESOP would be
$142,830. See "Pro Forma Data." In addition, after completion of the
reorganization and Offering, the Stock Company intends to implement, subject to
stockholder approval (which approval cannot be obtained earlier than six months
subsequent to the reorganization and Offering), a restricted stock plan. Upon
implementation, the award of shares of common stock from the restricted stock
plan will result in significant additional compensation expense. See "Pro Forma
Data" and "Management of the Bank--Benefit Plans--Recognition and Retention
Plan."
Financial Benefits to Officers and Directors
The Stock Company intends to implement certain benefit plans which may
provide to full-time employees, officers, trustees and directors up to 22% of
the common stock issued in the Offering. Full-time employees, including
executive officers, will participate in the ESOP, pursuant to which these
employees will be awarded up to 8% of the common stock issued in the Offering.
These shares will be awarded at no cost to the recipients, and will have a value
of $864,800 at the maximum of the Offering Range. Following the Offering, the
Stock Company intends to seek stockholder approval of the Recognition Plan and
the Stock Option Plan at a meeting of stockholders which may be held no earlier
than six months after completion of the Offering. If the Recognition Plan is
approved by stockholders of the Stock Company, the Recognition Plan intends to
acquire an amount of common stock equal to at least 4% of the shares of common
stock sold in the Offering, or 43,240 shares of common stock at the maximum of
the Offering Range. Such shares would be granted to officers, trustees and
directors of the Bank, the Stock Company and the
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Mutual Company at no cost to these recipients, for a total value of $432,400 at
the maximum of the Offering Range. If the Stock Option Plan is approved by
stockholders of the Stock Company, the Stock Company intends to reserve for
future issuance pursuant to such plan a number of shares of common stock equal
to 10% of the common stock sold in the Offering. Options to purchase common
stock at fair market value as of the date of the award of the options will be
granted to officers, trustees and directors of the Bank, the Stock Company and
the Mutual Company at no cost to them, and without risk as there is no
requirement that officers, trustees and directors exercise their options.
Possible Dilutive Effect of Issuance of Additional Shares
Shares of common stock to be issued pursuant to the Recognition Plan or
issued upon exercise of stock options granted pursuant to the Stock Option Plan
may be acquired by the Stock Company in the open market, or from
authorized-but-unissued shares of common stock. In the event that such shares
are issued from authorized-but-unissued shares of Common Stock, and assuming
shares are sold at the maximum of the Offering Range, the voting interests of
stockholders will be diluted by approximately 6.17%, net earnings per share
would be decreased by $0.01 and stockholders' equity per share would be
increased by $0.12 at the maximum of the Offering Range, respectively.
Strong Competition Within the Bank's Market Area
Competition in the banking and financial services industry is intense.
In its market area, the Bank competes for loans and deposits with commercial
banks, savings institutions, mortgage brokerage firms, mutual funds, insurance
companies, and brokerage and investment banking firms operating locally and
elsewhere. Many of these competitors have substantially greater resources and
lending limits than the Bank and may offer certain services that the Bank does
not or cannot provide. Deposit customers have shifted funds from relatively
low-yielding deposit accounts at banking institutions into other types of
investments, including, in particular, mutual funds.
Regulatory Oversight and Legislation
The Bank is subject to extensive regulation, supervision and
examination by the Massachusetts Division of Banks, as its chartering authority,
and by the FDIC as insurer of its deposits up to applicable limits. The Bank
also is a member of the Federal Home Loan Bank System and is subject to certain
limited regulations promulgated by the Federal Home Loan Bank (the "FHLB"). As
the holding company of the Bank, the Stock Company will be subject to regulation
and oversight by the FRB and the Division. Such regulation and supervision
govern the activities in which an institution and its holding company may engage
and are intended primarily for the protection of the insurance fund, depositors
and borrowers. Regulatory authorities have broad discretion in their supervisory
and enforcement activities and may impose restrictions on the operations and
management of an institution. Regulatory and law enforcement authorities also
have wide discretion and extensive enforcement powers under various consumer
protection and civil rights laws, including the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement
Procedures Act and the Massachusetts deceptive acts and practices law. These
laws permit private individual and class action law suits and provide for the
recovery of attorneys fees in certain instances. Any change in the
interpretation or application to the Bank of such laws, regulations and
oversight and enforcement powers, whether by the Division, the FDIC, other state
or federal authorities, Congress or the Massachusetts legislature, could have a
significant impact on the Stock Company, the Bank and their respective
operations. See "Regulation."
Absence of Market for Common Stock
The Stock Company, as a newly organized corporation, has never issued
capital stock and, consequently, there is no established market for its common
stock at this time. The Stock Company has applied to have its common stock
quoted on the Nasdaq SmallCap Market under the symbol "SUBC," subject to the
completion of the Offering and compliance with certain conditions including the
presence of at least two registered and active market makers. If the Stock
Company is unable, for any reason, to list the common stock on the Nasdaq
SmallCap Market, then the
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Stock Company intends to list the common stock on the over-the-counter market
with quotations available on the OTC Bulletin Board if it qualifies under their
listing criteria. A public trading market, having the desirable characteristics
of depth, liquidity and orderliness, depends upon the existence of willing
buyers and sellers at any given time, the presence of which depends on the
individual decisions of buyers and sellers over which neither the Stock Company
nor any market maker has control. Accordingly, there can be no assurance that an
active and liquid trading market for the common stock will develop or that, if
developed, would continue, nor is there any assurance that purchasers of the
common stock will be able to sell their shares at or above the purchase price.
The market value of the common stock would be affected adversely in the event a
liquid market for the common stock does not develop or broker-dealers
discontinue making a market in the common stock. See "Market for Common Stock."
Possible Increase in Estimated Valuation Range and Number of Shares Issued
The number of shares to be sold in the Offering may be increased as a
result of an increase in the Estimated Valuation Range of up to 15% to reflect
changes in market and financial conditions after the Offering begins. In the
event that the Offering Range is so increased, it is expected that the Stock
Company will issue up to 1,243,150 shares of common stock at $10 per share for
an aggregate purchase price of up to $12,431,500. An increase in the number of
shares issued will decrease a subscriber's pro forma net earnings per share and
stockholders' equity per share, and will increase the Company's pro forma
consolidated stockholders' equity and net earnings. Such an increase will also
increase the $10 per share purchase price as a percentage of pro forma
stockholders' equity per share and net earnings per share. See "Pro Forma Data."
Role of the Financial Advisor/Best Efforts Offering
The Bank and the Stock Company have engaged Trident Securities, Inc. as
a financial and marketing advisor, and Trident Securities, Inc. has agreed to
use its best efforts to solicit subscriptions and purchase orders for common
stock in the Offering. Trident Securities, Inc. has not prepared any report or
opinion constituting a recommendation or advice to the Bank or the Stock
Company, nor has it prepared an opinion as to the fairness of the $10 per share
purchase price or the terms of the Offering. Trident Securities, Inc. expresses
no opinion as to the price at which common stock to be issued in the Offering
may trade. Furthermore, Trident Securities, Inc. has not verified the accuracy
or completeness of the information contained in this prospectus. See "The
Reorganization and Offering--Plan of Distribution and Selling Commissions."
Conversion of Mutual Company to Stock Form
The Mutual Company may convert to stock form (a Conversion Transaction)
by merging the Mutual Company either into the Stock Company or the Bank. In a
Conversion Transaction, the shares of common stock owned by the Mutual Company
will be canceled and shares of common stock of the Stock Company will be offered
for sale to eligible depositors and others in a subscription and community
offering in accordance with regulations of the FDIC and the Division. The stock
issuance plan provides that any Conversion Transaction must be fair and
equitable to Minority Stockholders, and establishes a formula for adjusting the
Minority Ownership Interest in the event such adjustment is required by
applicable banking regulators. Regulations of the Division would prohibit a
Conversion Transaction for three years following the Offering, subject to a
waiver by the Division for supervisory reasons or for compelling and valid
business reasons established to the satisfaction of the Division. To date,
however, the Division has proposed but not yet issued final regulations
regarding the conversion of a Massachusetts mutual holding company to stock
form, and there can be no assurance that such regulations will be effective at
such time as the Mutual Company may wish to undertake a Conversion Transaction.
Moreover, there can be no assurance as to what form such regulations will take
and what conditions the Division may impose on a Conversion Transaction. Neither
the Bank nor the Stock Company has any plan to undertake a Conversion
Transaction. If a Conversion Transaction does not occur, the Mutual Company will
continue to own at least 51% of the outstanding common stock, and purchasers in
the Offering will remain Minority Stockholders.
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The Mutual Company may, from time-to-time, waive the receipt of any
dividends declared and paid by the Stock Company, subject to regulatory
approval. There can be no assurance that the Mutual Company will waive the
receipt of dividends, or that any dividend waiver would be approved by
applicable banking regulators. Any waiver of dividends by the Mutual Company, if
permitted by regulatory authorities, is likely to (i) be subject to various
conditions, and (ii) result in a reduction of the Minority Ownership Interest in
the event of a Conversion Transaction to reflect the benefit of any waived
dividends to the Minority Stockholders. Such an adjustment would have the effect
of diluting the aggregate voting interest of the Minority Stockholders in the
Stock Company immediately following a Conversion Transaction. Moreover, in the
event of a Conversion Transaction, any dividends received by the Mutual Company,
as well as any other assets of the Mutual Company (other than common stock in
the Company), will be credited to the Mutual Company in determining the number
of shares of Stock Company common stock that will be offered for sale in a
Conversion Transaction and the amount of any voting dilution of the Minority
Ownership Interest. See "Dividend Policy."
Conditions to Closing of the Offering
The Offering will not be consummated until the following conditions are
satisfied: (i) the Bank's corporators approve the stock issuance plan; (ii) the
Bank receives favorable rulings or opinions of counsel with respect to the
federal and Massachusetts tax consequences of establishing the Stock Holding
Company and issuing common stock in the Offering; (iii) the Division authorizes
the Offering; and (iv) the FRB approves the Offering and the application by the
Stock Company under the Bank Holding Company Act to acquire direct or indirect
control of the Bank. The Bank's corporators have voted to approve the stock
issuance plan and the Bank has received conditional approval of its applications
by the applicable regulatory authorities; however, there can be no assurances
that all required conditions will be satisfied or that final regulatory
approvals will be obtained. Moreover, the reorganization and Offering cannot be
completed until 15 days following approval of the holding company application by
the FRB. Approvals and authorizations by the FRB or the Division do not
constitute recommendations or endorsements of the reorganization or the Offering
by such entities.
Dependence on Key Personnel
The Bank depends to a considerable degree on Eugene G. Stone, who has
served as the Bank's President and Chief Executive Officer since 1988. The loss
of Mr. Stone as President and Chief Executive Officer would adversely affect the
operations of the Bank. However, the Bank does not maintain, and does not expect
to obtain, a "Key Man" life insurance policy for Mr. Stone.
Technology Risks and Year 2000 Problem
The banking industry is undergoing rapid technological changes with
frequent introductions of new technology-driven products and services. In
addition to improving customer services, the effective use of technology
increases efficiency and enables financial institutions to reduce costs. The
Stock Company's future success will depend, in part, on its ability to address
the needs of its customers by using technology to provide products and services
that will satisfy customer demands, as well as to create additional efficiencies
in the Bank's operations. Many of the Bank's competitors have substantially
greater resources than the Bank to invest in technological improvements. There
can be no assurance that the Bank will be able to effectively implement new
technology-driven products and services or be successful in marketing such
products and services to the public.
In addition, because of the demand for technology-driven products,
banks are contracting increasingly with outside vendors to provide data
processing and core banking functions. The use of technology-related products,
services, delivery channels, and processes expose a bank to various risks,
particularly transaction, strategic, reputation and compliance risk. Banks are
generally expected to successfully manage technology-related risks with all
other risks to ensure that a bank's risk management is integrated and
comprehensive, primarily through identifying, measuring, monitoring and
controlling risks associated with the use of technology. There can be no
assurance that the Bank will
24
<PAGE>
be able to successfully manage the risks associated with its increased
dependency on technology. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."
The year 2000 issue centers upon concern among industry experts that on
January 1, 2000 computers will be unable to "read" the new year and there may be
widespread computer malfunctions. The Bank generally relies on software and
hardware developed by independent third parties to provide the information
systems used by the Bank, and we have been advised by our information systems
providers that the issue is being addressed. We are also in the process of
reviewing internally developed programs to assure year 2000 compliance. Based on
information currently available, management does not believe that significant
additional costs will be incurred in connection with the year 2000 issue.
SERVICE BANCORP, MHC
The Mutual Company was formed in August 1997 as part of the Bank's
conversion from mutual to stock form. The Mutual Company is a
Massachusetts-chartered mutual holding company with the powers set forth in its
Charter and Bylaws and under Massachusetts law. The Mutual Company will own at
least 51% of the voting stock of the Stock Company so long as the Mutual Company
remains in existence. The Mutual Company is subject to regulation and
supervision by the FRB and the Division. See "Regulation--Holding Company
Regulation." Immediately after the Offering is completed, the Mutual Company is
not expected to engage in any business activity other than to hold at least 51%
of the Stock Company's common stock and to invest any liquid assets of the
Mutual Company. The Mutual Company's offices are located at 81 Main Street,
Medway, Massachusetts 02053, and its telephone number at that address is (508)
533-4343.
SERVICE BANCORP, INC.
Service Bancorp, Inc. was recently organized at the direction of the
Board of Directors of the Bank and the Board of Trustees of the Mutual Company
for the purpose of issuing all of the common stock in the Offering and acquiring
all of the capital stock of the Bank upon completion of the Offering. The Bank
and the Mutual Company have applied to the Division to form the Stock Company,
and also have applied to the FRB for the Stock Company to own up to 100% of the
voting stock of the Bank. No final approvals of the Division or the FRB have
been received as of the date of this prospectus. The Stock Company will be
subject to regulation and supervision by the Division and the FRB. See
"Regulation--General" and "--Holding Company Regulation." Upon completion of the
Offering, the Stock Company will have no significant liabilities and no assets
other than 100% of the shares of the Bank's outstanding common stock, its loan
to the ESOP and up to 50% of the net proceeds of the Offering. The Stock Company
intends to loan to the ESOP a portion of the net proceeds that it retains to
enable the ESOP to purchase up to 8% of the common stock issued in the Offering.
See "Use of Proceeds." A description of the management of the Stock Company is
set forth under "Management of the Stock Company." Initially, the Stock Company
will neither own nor lease any property, but will instead use the premises,
equipment and furniture of the Bank. At the present time, the Stock Company does
not intend to employ any persons other than certain officers who are currently
officers of the Bank but will use the support staff of the Bank from time to
time. Additional employees will be hired as appropriate to the extent the Stock
Company expands its business in the future. The Stock Company's offices are
located at the executive offices of the Bank, at 81 Main Street, Medway,
Massachusetts 02053. Its telephone number is (508) 533-4343.
SUMMIT BANK
The Bank was organized in 1871 as a Massachusetts-chartered mutual
savings bank and was reorganized into the stock form of ownership in August 1997
as part of the Bank's original mutual holding company reorganization. No common
stock was offered for sale to depositors or other persons at the time of the
reorganization in 1997. The Bank's deposits are insured by the Bank Insurance
Fund, as administered by the FDIC, up to the maximum amount permitted by law,
and by the Depositors Insurance Fund in excess of the maximum FDIC insurance.
The Bank is a
25
<PAGE>
community-oriented savings bank engaged primarily in the business of offering
FDIC-insured deposits to customers through its branch offices and using those
deposits, together with funds generated from operations and borrowings, to make
one- to four- family residential mortgage loans, commercial real estate loans,
commercial business loans, construction loans and consumer loans, and to invest
in mortgage-backed and other securities. At March 31, 1998, the Bank had total
assets of $131.2 million, total deposits of $108.1 million and retained earnings
of $9.9 million. The Bank's business is described in more detail in "Business of
the Bank."
26
<PAGE>
REGULATORY CAPITAL COMPLIANCE
At March 31, 1998, the Bank exceeded each of its regulatory capital
requirements. Set forth below is a summary of the Bank's compliance with the
FDIC capital standards as of March 31, 1998, on an historical and pro forma
basis assuming that the indicated number of shares were sold as of such date and
receipt by the Bank of 50% of the net proceeds. For purposes of the table below,
the amount expected to be borrowed by the ESOP and the cost of its shares
expected to be acquired by the Recognition Plan are deducted from pro forma
regulatory capital. See "Management of the Bank." The Mutual Company and the
Stock Company (as bank holding companies) are subject to FRB capital adequacy
guidelines (on a consolidated basis) which are substantially similar to the FDIC
capital requirements for the Bank. On a pro forma consolidated basis after the
reorganization and Offering, the Stock Company's pro forma stockholders' equity
will exceed these requirements. See "Regulation--Holding Company Regulation."
<TABLE>
<CAPTION>
Pro Forma at March 31, 1998, Based upon the Sale of
--------------------------------------------------------------------------------
1,243,150
799,000 940,000 1,081,000 Shares(1)
Shares Shares Shares at Adjusted
Historical at at Minimum of at Midpoint of at Maximum of Maximum of
March 31, 1998 Offering Range Offering Range Offering Range Offering Range
-------------- -------------- -------------- -------------- --------------
Percent Percent Percent Percent Percent
of of of of of
Amount Assets(2) Amount Assets(2) Amount Assets(2) Amount Assets(2) Amount Assets(2)
------ --------- ------ --------- ------ --------- ------ --------- ------ ---------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital............. $ 9,890 7.54% $12,685 9.42% $ 13,212 9.77% $ 13,748 10.11% $ 14,364 10.51%
======== ==== ======= ==== ======== ===== ======== ===== ======== =====
Leverage capital:
Capital level (3)...... $ 9,454 7.78% $12,249 9.81% $ 12,776 10.18% $ 13,312 10.55% $ 13,928 19.26%
Requirement (4)........ 4,859 4.00% 4,996 4.00% 5,022 4.00% 5,048 4.00% 5,078 4.00
-------- ---- ------- ---- -------- ----- -------- ---- -------- ----
Excess............... $ 4,595 3.78% $ 7,253 5.81% $ 7,754 6.18% $ 8,264 6.55% $ 8,850 15.26%
======== ==== ======= ==== ======== ===== ======== ==== ======== ====
Risk-based capital:
Capital level (3)(5)... $ 10,014 14.39% $12,809 17.97% $ 13,336 18.62% $13,872 19.28% $ 14,488 20.03%
Requirement............ 5,567 8.00 5,704 8.00% 5,730 8.00% 5,755 8.00% 5,785 8.00
-------- ---- ------- ---- -------- ----- -------- ---- -------- ----
Excess............... $ 4,447 6.39% $ 7,105 9.97% $ 7,606 10.62% $ 8,117 11.28% $ 8,703 12.03%
======== ==== ======= ==== ======== ===== ======== ===== ======== =====
</TABLE>
- ----------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Offering Range of up to 15% as a
result of regulatory considerations or changes in market conditions or
general financial and economic conditions following the commencement of the
Offering.
(2) GAAP capital levels are shown as a percentage of total assets. Leverage
capital levels are shown as a percentage of tangible assets. Risk-based
capital levels are shown as a percentage of risk-weighted assets.
(3) Pro forma capital levels assume that the Bank funds the Recognition Plan to
enable the Recognition Plan to purchase a number of shares equal to 4% of
the common stock sold in the Offering, and that the ESOP purchases 8% of
the shares sold in the Offering. See "Management of the Bank" for a
discussion of the Recognition Plan and ESOP.
(4) The current leverage capital requirement for banks is 3% of total adjusted
assets for banks that receive the highest supervisory rating for safety and
soundness and that are not experiencing or anticipating significant growth.
The current leverage capital ratio applicable to all other banks is 4% to
5%. Management of the Bank believes that the applicable leverage capital
requirement for the Bank is 3% of total adjustable assets. See
"Regulation--Regulatory Capital Requirements.
(5) Assumes net proceeds are invested in assets that carry a 50%
risk-weighting.
27
<PAGE>
USE OF PROCEEDS
Although the actual net proceeds from the sale of the common stock
cannot be determined until the Offering is completed, it is presently
anticipated, based on the assumptions set forth in "Pro Forma Data", that the
net proceeds from the sale of the common stock will be as set forth in the
following table.
<TABLE>
<CAPTION>
Net Offering Proceeds
Based upon the Sale for $10.00 per share of
---------------------------------------------------------
799,000 940,000 1,081,000 1,243,150
Shares Shares Shares Shares
------ ------ ------ ------
(In Thousands)
<S> <C> <C> <C> <C>
Gross proceeds.............. $ 7,990 $ 9,400 $ 10,810 $ 12,432
Expenses.................... (482) (500) (500) (500)
--------- --------- --------- ---------
Estimated net proceeds...... $ 7,508 $ 8,900 $ 10,310 $ 11,932
========= ========= ========= =========
</TABLE>
The Stock Company will contribute 50% of the net proceeds of the
Offering to the Bank. The net proceeds received by the Bank from the Stock
Company will be added to the Bank's general funds which the Bank currently
intends to use for general corporate purposes, including investments in short-
and medium-term investment grade debt securities and marketable equity
securities. Depending on market conditions, the Bank also intends to use such
funds to increase its origination of mortgage, consumer and commercial business
loans. The Bank may also use such funds to establish new branch offices and ATM
locations, and to expand operations through acquisitions of other financial
institutions, branch offices or other financial services companies. However, the
Stock Company and the Bank have no current arrangements, understandings or
agreements regrading any such transactions. To the extent that the stock-based
benefit programs which the Stock Company intends to adopt subsequent to the
Offering are not funded with authorized-but-unissued shares of common stock, the
Stock Company or the Bank may use net proceeds from the Offering to fund the
purchase of stock to be awarded under such stock benefit programs. See "Risk
Factors--Possible Dilutive Effect of Issuance of Additional Shares" and
"Management of the Bank--Stock Option Plan" and "--Recognition Plan."
The Stock Company intends to use a portion of the net proceeds it
retains to make a loan directly to the ESOP to enable the ESOP to purchase in
the Offering, or in the open market to the extent common stock is not available
to fill the ESOP's subscription, 8% of the shares sold in the Offering. The
amount of the ESOP loan may be increased to the extent ESOP shares are not
available at the $10 per share offering price. See "Management of the
Bank--Employee Stock Ownership Plan and Trust." The Stock Company and the Bank
may alternatively choose to fund the ESOP's stock purchase through a loan by a
third party financial institution. The remaining net proceeds retained by the
Stock Company will be invested initially in short- and medium-term investments.
Upon completion of the Offering, the Board of Directors of the Stock
Company will have the authority to adopt stock repurchase plans, subject to
statutory and regulatory requirements. The FDIC may prohibit the holding company
of a state-chartered savings bank which has converted from the mutual to stock
form of ownership from repurchasing its capital stock within one year following
the date of its conversion to stock form, except that stock repurchases of no
greater than 5% of outstanding capital stock may be made during this one-year
period where compelling and valid business reasons are established to the
satisfaction of the FDIC. The regulations of the Division also restrict stock
repurchases by mutual holding company subsidiaries within three years of a stock
issuance unless the repurchase (i) is part of a pro rata offer made to all
stockholders and approved by the Division, (ii) is limited to the repurchase of
qualifying shares of a director, (iii) is made in the open market by an employee
stock benefit plan; or (iv) is limited to 5% of the outstanding capital stock of
the subsidiary savings bank or subsidiary holding company and the Division is
satisfied that valid and compelling business reasons exist for the repurchase.
Based upon facts and circumstances following the Offering and subject
to applicable regulatory requirements, the Board of Directors may determine to
repurchase stock in the future. Such facts and circumstances may include but not
be limited to: (i) market and financial factors such as the price at which the
stock is trading in the market, the
28
<PAGE>
volume of trading, the attractiveness of other investment alternatives in terms
of the rate of return and risk involved in the investment, the ability to
increase the book value and/or earnings per share of the remaining outstanding
shares, and the opportunity to improve the Stock Company's return on equity;
(ii) the avoidance of dilution to stockholders by not having to issue additional
shares to cover the exercise of stock options or the purchase of shares by the
ESOP in the event the ESOP is unable to acquire shares in the Offering, or to
fund the Stock Plans; and (iii) any other circumstances in which repurchases
would be in the best interests of the Stock Company and its shareholders. In the
event the Stock Company determines to repurchase stock, such repurchases may be
made at market prices which may be in excess of the purchase price in the
Offering. Any stock repurchases will be subject to the determination of the
Board of Directors that both the Stock Company and the Bank will be capitalized
in excess of all applicable regulatory requirements after any such repurchases
and that such capital will be adequate, taking into account, among other things,
the level of non-performing and other risk assets, the Stock Company's and the
Bank's current and projected results of operations and asset/liability
structure, the economic environment, tax and other considerations. See "The
Reorganization and Offering--Procedure for Purchasing Shares."
DIVIDEND POLICY
The Board of Directors of the Stock Company currently does not intend
to pay a cash dividend on its common stock. While the Board of Directors may
consider a policy of paying cash dividends on its common stock in the future,
there can be no assurance that dividends will be paid or if paid, what the
amounts of dividends will be, or whether such dividends, once paid, will
continue to be paid. In addition, the source of funds for the Stock Company's
payment of dividends will, in part, depend upon dividends from the Bank, the net
proceeds retained by the Stock Company and the earnings of the Stock Company.
The Mutual Company may, from time to time, waive the receipt of dividends
declared and paid by the Stock Company, subject to regulatory approval. Under
FRB policy, a bank holding company should pay dividends only to the extent that
the holding company's net income for the past year is sufficient to cover both
the payment of the dividend and a rate of earnings retention that is consistent
with the holding company's capital needs, asset quality and overall financial
condition. See "Regulation--Holding Company Regulation--Dividends."
The Bank will not be permitted to pay dividends on its common stock if
its stockholders' equity would be reduced below the amount required for its
liquidation account. See "The Reorganization and Offering--Liquidation Rights."
In addition, the Bank's ability to pay cash dividends on its common stock is
subject to various other federal and state restrictions. Under FDIC regulations,
the Bank would be prohibited from paying dividends if, among other things, the
Bank were not in compliance with applicable regulatory capital requirements.
Under Massachusetts law, a stock savings bank may pay dividends only out of its
net profits and only to the extent it does not impair its capital and surplus
accounts. Provided that the Bank can meet these requirements, Massachusetts law
permits net profits of a bank to be distributed as a dividend so long as, after
such distribution, either (i) the capital and surplus accounts of the bank equal
at least 10% of its deposit liabilities, or (ii) the surplus account of the bank
equals 100% of its capital account, subject to certain statutory exceptions.
Dividends or any repurchase by the Bank of its stock in excess of the Bank's
current and accumulated earnings could result in the realization by the Bank of
taxable income. See "Federal and State Taxation--Federal Taxation."
MARKET FOR COMMON STOCK
The Stock Company has applied to have the common stock quoted on the
Nasdaq SmallCap Market System under the symbol "SUBC." The requirements for
listing include a minimum number of publicly traded shares, a minimum market
capitalization, and a minimum number of market makers and record holders.
Trident Securities, Inc. has indicated its intention to make a market in the
common stock, and based on our analysis of the results of recent conversion
stock offerings we anticipate that the Stock Company will satisfy the Nasdaq
SmallCap listing requirements. If we are unable, for any reason, to list the
common stock on the Nasdaq SmallCap Market, or to continue to be eligible for
such listing, then we intend to list the common stock on the over-the-counter
market, with quotations available on the OTC Bulletin Board, subject to the
applicable listing criteria for such markets.
29
<PAGE>
The existence of a public trading market will depend upon the presence
in the market of both willing buyers and willing sellers at any given time. The
presence of a sufficient number of buyers and sellers at any given time is a
factor over which neither the Stock Company nor any broker or dealer has
control. The absence of an active and liquid trading market may make it
difficult to sell the common stock and may have an adverse effect on the price
of the common stock. Purchasers should consider the potentially illiquid and
long-term nature of their investment in the common stock.
CAPITALIZATION
The following table presents the historical capitalization of the Bank
at March 31, 1998, and the pro forma consolidated capitalization of the Stock
Company after giving effect to the Offering, based upon the sale of the number
of shares indicated in the table and the other assumptions set forth under "Pro
Forma Data."
<TABLE>
<CAPTION> Pro Forma Consolidated Capitalization
Based upon the Sale for $10.00 Per Share of
-------------------------------------------------------------------
1,243,150
799,000 940,000 1,081,000 Shares(1)
Actual Shares Shares Shares at Adjusted
as of at Minimum of at Midpoint of at Maximum of Maximum of
March 31, 1998 Offering Range Offering Range Offering Range Offering Range
-------------- -------------- -------------- -------------- --------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Deposits(2) ............................... $ 108,056 $ 108,056 $ 108,056 $ 108,056 $ 108,056
Borrowed funds ............................ 12,404 12,404 12,404 12,404 12,404
--------- --------- --------- --------- ---------
Total deposits and borrowed funds ......... $ 120,460 $ 120,460 $ 120,460 $ 120,460 $ 120,460
========= ========= ========= ========= =========
Stockholders' equity:
Common Stock, $.01 par value, 12,000,000
shares authorized; shares
to be issued as reflected ............... $ -- $ 17 $ 20 $ 23 $ 26
Additional paid-in capital(3) ............ -- 7,491 8,880 10,287 11,906
Retained earnings(4) ...................... 9,890 9,890 9,890 9,890 9,890
Less:
Common stock acquired
by ESOP(5) ............................. -- (639) (752) (865) (995)
Common stock acquired
by Recognition Plan(6).................. -- (320) (376) (432) (497)
--------- --------- --------- --------- ---------
Total stockholders' equity ................ $ 9,890 $ 16,439 $ 17,662 $ 18,903 $ 20,330
========= ========= ========= ========= =========
</TABLE>
- -----------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to a 15% increase in the Estimated Valuation Range to
reflect changes in market or general financial conditions following the
commencement of the Offering.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
common stock in the Offering. Such withdrawals would reduce pro forma
deposits by the amount of such withdrawals.
(3) Reflects the issuance of shares to the Mutual Company and the sale of
shares in the Offering. Does not include proceeds from the Offering that
the Stock Company intends to lend to the ESOP to enable it to purchase
shares of common stock in the Offering. No effect has been given to the
issuance of additional shares of common stock pursuant to the stock option
plan that the Stock Company expects to adopt. If such plan is approved by
stockholders, an amount equal to 10% of the shares of common stock issued
in the Offering will be reserved for issuance upon the exercise of options.
See "Management of the Bank."
(4) The retained earnings of the Bank will be restricted after the Offering.
See "Dividend Policy" and "Regulation--Federal Regulation of Savings
Institutions--Limitations on Capital Distributions." Includes unrealized
gains on securities available for sale, net of tax, of $436,000.
(5) Assumes that 8% of the shares sold in the Offering will be purchased by the
ESOP and that the funds used to acquire the ESOP shares will be borrowed
from the Stock Company. The common stock acquired by the ESOP is reflected
as a reduction of stockholders' equity. See "Management of the
Bank--Employee Stock Ownership Plan and Trust."
(6) Assumes that subsequent to the Offering an amount equal to 4% of the shares
of common stock sold in the Offering is purchased by the Recognition Plan
through open market purchases. The common stock to be purchased by the
Recognition Plan is reflected as a reduction of stockholders' equity. See
"Risk Factors--Possible Dilutive Effect of Issuance of Additional Shares,"
"Pro Forma Data" and "Management of the Bank."
30
<PAGE>
PRO FORMA DATA
The actual net proceeds from the sale of the common stock cannot be
determined until the Offering is completed. The following estimated pro forma
information is based upon the following assumptions: (i) 75,000 shares of
common stock will be purchased by employees and directors of the Bank, the
Mutual Company and the Stock Company, the ESOP will purchase 8% of the common
stock sold in the Offering, and the remaining shares will be sold in the
Subscription and/or Community Offering; (ii) Trident Securities, Inc. will
receive a fee equal to 2% of the aggregate Subscription Price of shares sold to
persons other than employees, trustees, directors and the ESOP, subject to a
limit of $150,000; and (iii) reorganization and Offering expenses, excluding the
fees payable to Trident Securities, Inc., will be approximately $350,000. Actual
expenses may vary from those estimated.
Pro forma consolidated net income of the Stock Company for the nine
months ended March 31, 1998 and for the fiscal year ended June 30, 1997 has been
calculated as if the common stock had been sold at the beginning of the
respective periods and the net proceeds had been invested at 5.66% and 5.39%,
respectively (the one year U.S. Treasury bill rate as of March 31, 1998 and June
30, 1997, respectively). The U.S. Treasury rate was used on the reinvestment of
proceeds because it more appropriately reflects a market rate of return than the
arithmetic average of the average yield of the Bank's interest-earning assets
and cost of deposits. The tables do not reflect the effect of withdrawals from
deposit accounts for the purchase of common stock. The pro forma after-tax yield
for the Stock Company and the Bank is assumed to be 3.23% for the nine months
ended March 31, 1998 and 3.40% for the fiscal year ended June 30, 1997 (in both
cases, based on an assumed tax rate of 40.0%). Historical and pro forma per
share amounts have been calculated by dividing historical and pro forma amounts
by the indicated number of shares of common stock, as adjusted to give effect to
the purchase of shares by the ESOP. No effect has been given in the pro forma
stockholders' equity calculations for the assumed earnings on the net proceeds.
As discussed under "Use of Proceeds," the Stock Company will retain 50% of the
net proceeds of the Offering.
The following pro forma information may not be representative of the
financial effects of the foregoing transactions at the dates on which such
transactions actually occur and should not be taken as indicative of future
results of operations. Pro forma consolidated stockholders' equity represents
the difference between the stated amount of assets and liabilities of the Stock
Company. The pro forma stockholders' equity is not intended to represent the
fair market value of the common stock and may be greater than amounts that would
be available for distribution to stockholders in the event of liquidation.
31
<PAGE>
The following tables summarize historical data of the Bank and pro
forma data of the Stock Company at or for the nine months ended March 31, 1998
and at or for the fiscal year ended June 30, 1997, based on the assumptions set
forth above and in the tables and should not be used as a basis for projections
of market value of the common stock following the Offering. The tables below
give effect to the Recognition Plan, which is expected to be adopted by the
Stock Company following the Offering and presented to stockholders for approval.
See "Management of the Bank--Recognition Plan." No effect has been given in the
tables to the possible issuance of additional shares reserved for future
issuance pursuant to the Stock Option Plan to be adopted by the Board of
Directors of the Stock Company and presented to stockholders for approval, nor
does book value as presented give any effect to the liquidation account to be
established for the benefit of Eligible Account Holders or Supplement Eligible
Account Holders, or the tax effect of the bad debt reserve and other factors.
<TABLE>
<CAPTION>
At or for the Nine Months Ended March 31, 1998
Based upon the sale for $10.00 per share of
--------------------------------------------------------------------------
1,243,150
799,000 940,000 1,081,000 Shares(1)
Shares Shares Shares at Adjusted
at Minimum of at Midpoint of at Maximum of Maximum of
Offering Range Offering Range Offering Range Offering Range
-------------- -------------- -------------- --------------
(Dollars in Thousands, except per share data)
<S> <C> <C> <C> <C>
Gross proceeds ..................................... $ 7,990 $ 9,400 $ 10,810 $ 12,432
Less expenses ...................................... 482 500 500 500
----------- ----------- ----------- -----------
Estimated net proceeds ........................... 7,508 8,900 10,310 11,932
Less: common stock purchased by ESOP ............ (639) (752) (865) (995)
Less: common stock purchased by
Recognition Plan ................................ (320) (376) (432) (497)
----------- ----------- ----------- -----------
Estimated net proceeds, as adjusted ............ $ 6,549 $ 7,772 $ 9,013 $ 10,440
=========== =========== =========== ===========
For the 9 months ended March 31, 1998
Consolidated net income
Historical income ................................ $ 955 $ 955 $ 955 $ 955
Pro forma income on net proceeds ................. 159 189 219 253
Pro forma ESOP adjustment ........................ (29) (34) (39) (45)
Pro forma Recognition Plan adjustment(3) ......... (29) (34) (39) (45)
----------- ----------- ----------- -----------
Pro forma net income ........................... $ 1,056 $ 1,076 $ 1,096 $ 1,118
=========== =========== =========== ===========
Net income per share:
Historical ....................................... $ 0.58 $ 0.50 $ 0.43 $ 0.37
Pro forma income on net proceeds ................. 0.10 0.10 0.10 0.10
Pro forma ESOP adjustment(2) ..................... (0.02) (0.02) (0.02) (0.02)
Pro forma Recognition Plan adjustment(3) ......... (0.02) (0.02) (0.02) (0.02)
----------- ----------- ----------- -----------
Pro forma net income per share(2)(3)(4) ........ $ 0.64 $ 0.56 $ 0.49 $ 0.43
=========== =========== =========== ===========
Number of shares used in calculating
earnings per share ................................ 1,638,477 1,927,620 2,216,763 2,549,277
=========== =========== =========== ===========
At March 31, 1998:
Stockholders' equity:
Historical ....................................... $ 9,890 $ 9,890 $ 9,890 $ 9,890
Estimated net proceeds ........................... 7,508 8,900 10,310 11,932
Less: common stock acquired by ESOP(2) ........... (639) (752) (865) (995)
Less: common stock acquired by
Recognition Plan(3) ............................. (320) (376) (432) (497)
----------- ----------- ----------- -----------
Pro forma stockholders' equity(5) ............... $ 16,439 $ 17,662 $ 18,903 $ 20,330
=========== =========== =========== ===========
Stockholders' equity per share:
Historical ....................................... $ 5.82 $ 4.95 $ 4.30 $ 3.74
Estimated net proceeds ........................... 4.42 4.45 4.48 4.51
Less: common stock acquired by ESOP .............. (0.38) (0.38) (0.38) (0.38)
Less: common stock acquired by
Recognition Plan ................................ (0.19) (0.19) (0.19) (0.19)
----------- ----------- ----------- -----------
Pro forma stockholders' equity
per share(3)(4)(5) .............................. $ 9.67 $ 8.83 $ 8.21 $ 7.68
=========== =========== =========== ===========
Offering price as a multiple of pro forma net
earnings per share (annualized) ................... 11.72x 13.39x 15.31x 17.44x
=========== =========== =========== ===========
Offering price as a percentage of pro forma
stockholders' equity per share .................... 103.41% 113.25% 121.80% 130.21%
=========== =========== =========== ===========
</TABLE>
(Footnotes on next page)
32
<PAGE>
- -------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to a 15% increase in the Estimated Valuation Range to
reflect changes in market or general financial conditions following the
commencement of the Offering.
(2) It is assumed that 8% of the shares sold in the Offering will be purchased
by the ESOP. For purposes of this table, the funds used to acquire such
shares are assumed to have been borrowed by the ESOP from the Stock
Company. The amount to be borrowed is reflected as a reduction of
stockholders' equity. The Bank intends to make annual contributions to the
ESOP in an amount at least equal to the principal and interest requirement
of the debt. The Bank's total annual payment of the ESOP debt is based upon
10 equal annual installments of principal, with an assumed interest rate of
8.5%. The pro forma net earnings information makes the following
assumptions: (i) the Bank's contribution to the ESOP is equivalent to the
debt service requirement for a full year and was made at the end of the
period; (ii) 4,794, 5,640, 6,486 and 7,459 shares at the minimum, midpoint,
maximum and adjusted maximum of the Offering Range, respectively, were
committed to be released during the nine months ended March 31, 1998, at an
average fair value of $10.00 per share in accordance with Statement of
Position ("SOP") 93-6; and (iii) only the ESOP shares committed to be
released were considered outstanding for purposes of the net earnings per
share calculations. See "Management of the Bank--Employee Stock Ownership
Plan and Trust."
(3) Gives effect to the Recognition Plan expected to be adopted by the Stock
Company following the Offering. This plan intends to acquire a number of
shares of common stock equal to 4% of the shares sold in the Offering, or
31,960, 37,600, 43,240, and 49,726 shares of common stock at the minimum,
midpoint, maximum and adjusted maximum of the Offering Range, respectively,
either through open market purchases, or from authorized but unissued
shares of common stock or treasury stock of the Stock Company, if any.
Funds used by the Recognition Plan to purchase the shares will be
contributed to the plan by the Stock Company. In calculating the pro forma
effect of the Recognition Plan, it is assumed that the shares were acquired
by the plan in open market purchases at the beginning of the period
presented for a purchase price equal to the Subscription Price, and that
20% of the amount contributed was an amortized expense during the period.
The issuance of authorized but unissued shares of the common stock to the
Recognition Plan instead of open market purchases would dilute the voting
interests of existing stockholders by approximately 4% and pro forma net
earnings per share would be $0.64, $0.55, $0.49 and $0.43 at the minimum,
midpoint, maximum and adjusted maximum of the Offering Range, respectively,
and pro forma stockholders' equity per share would be $9.68, $8.85, $8.25
and $7.73 at the minimum, midpoint, maximum and adjusted maximum of the
Offering Range, respectively. There can be no assurance that the actual
purchase price of the shares granted under the Recognition Plan will be
equal to the Subscription Price. See "Management of the Bank--Recognition
Plan."
(4) No effect has been given to the issuance of additional shares of common
stock pursuant to the Stock Option Plan expected to be adopted by the Stock
Company following the Offering. Under the stock option plan, an amount
equal to 10% of the common stock sold in the Offering, or 79,900, 94,000,
108,100 and 124,315 shares at the minimum, midpoint, maximum and adjusted
maximum of the Offering Range, respectively, will be reserved for future
issuance upon the exercise of options to be granted under the Stock Option
Plan. The issuance of common stock pursuant to the exercise of options
under the Stock Option Plan will result in the dilution of existing
stockholders' interests. Assuming all options were exercised at the end of
the period at an exercise price equal to the Subscription Price, existing
stockholders' voting interest would be diluted by 9.1%, and at the minimum,
midpoint, maximum and adjusted maximum of the Offering Range, the pro forma
net earnings per share would be $0.61, $0.53, $0.47 and $0.42,
respectively, and the pro forma stockholders' equity per share would be
$9.68, $8.88, $8.30 and $7.79, respectively. See "Management of the
Bank--Stock Option Plan."
(5) The retained earnings of the Bank will continue to be restricted after the
Offering. See "Dividend Policy" and "Regulation--Regulation of Savings
Institutions."
33
<PAGE>
<TABLE>
<CAPTION>
At or For the Fiscal Year Ended June 30, 1997
Based upon the Sale for $10.00 per share of
----------------------------------------------------------------
1,243,150
799,000 940,000 1,081,000 Shares(1)
Shares Shares Shares at Adjusted
at Minimum of at Midpoint of at Maximum of Maximum of
Offering Range Offering Range Offering Range Offering Range
-------------- -------------- -------------- --------------
(Dollars in Thousands, except per share data)
<S> <C> <C> <C> <C>
Gross proceeds ................................................. $ 7,990 $ 9,400 $ 10,810 $ 12,432
Less expenses .................................................. 482 500 500 500
----------- ----------- ----------- -----------
Estimated net proceeds ....................................... 7,508 8,900 10,310 11,932
Less: common stock purchased by ESOP(2) ...................... (639) (752) (865) (995)
Less: common stock purchased by Recognition Plan(3) .......... (320) (376) (432) (497)
----------- ----------- ----------- -----------
Estimated net proceeds, as adjusted ........................ $ 6,549 $ 7,772 $ 9,013 $ 10,440
=========== =========== ----------- ===========
For the 12 Months Ended June 30, 1997:
Historical ................................................... $ 1,082 $ 1,082 $ 1,082 $ 1,082
Pro forma income on net proceeds ............................. 222 264 306 355
Pro forma ESOP adjustment(2) ................................. (38) (45) (52) (60)
Pro forma Recognition Plan adjustment(3) ..................... (38) (45) (52) (60)
----------- ----------- ----------- -----------
Pro forma net income ....................................... $ 1,228 $ 1,256 $ 1,284 $ 1,317
=========== =========== =========== ===========
Net income per share:
Historical ................................................... $ 0.66 $ 0.56 $ 0.49 $ 0.42
Pro forma income on net proceeds ............................. 0.14 0.14 0.14 0.14
Pro forma ESOP adjustment(2) ................................. (0.02) (0.02) (0.02) (0.02)
Pro forma Recognition Plan adjustment(3) ..................... (0.02) (0.02) (0.02) (0.02)
----------- ----------- ----------- -----------
Pro forma net income per share(2)(3)(4) .................... $ 0.76 $ 0.66 $ 0.59 $ 0.52
=========== =========== =========== ===========
Number of shares used in calculating
earnings per share ............................................ 1,639,276 1,928,560 2,217,844 2,550,521
=========== =========== =========== ===========
At June 30, 1997:
Stockholders' equity:
Historical ................................................... $ 8,695 $ 8,695 $ 8,695 $ 8,695
Estimated net proceeds ....................................... 7,508 8,900 10,310 11,932
Less: common stock acquired by ESOP(2) ....................... (639) (752) (865) (995)
common stock acquired by Recognition Plan(3) ........... (320) (376) (432) (497)
----------- ----------- ----------- -----------
Pro forma stockholders' equity(5) ........................... $ 15,244 $ 16,467 $ 17,708 $ 19,135
=========== =========== =========== ===========
Stockholders' equity per share:
Historical ................................................... $ 5.11 $ 4.35 $ 3.78 $ 3.29
Estimated net proceeds ....................................... 4.42 4.45 4.48 4.51
Less: Common stock acquired by ESOP(2) ....................... (0.38) (0.38) (0.38) (0.38)
Common stock acquired by Recognition Plan(3) ........... (0.19) (0.19) (0.19) (0.19)
----------- ----------- ----------- -----------
Pro forma stockholders' equity per share(3)(4)(5) ............ $ 8.96 $ 8.23 $ 7.69 $ 7.23
=========== =========== =========== ===========
Offering price as a multiple of pro forma net earnings per
share ........................................................ 13.16x 15.15x 16.95x 19.23x
=========== =========== =========== ===========
Offering price as a percentage of pro forma stockholders'
equity per share ............................................. 111.61% 121.51% 130.04% 138.31%
=========== =========== =========== ===========
(Footnotes on next page)
</TABLE>
34
<PAGE>
- -----------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to a 15% increase in the Estimated Valuation Range to
reflect changes in market or general financial conditions following the
commencement of the Offering.
(2) It is assumed that 8% of the shares sold in the Offering will be purchased
by the ESOP. For purposes of this table, the funds used to acquire such
shares are assumed to have been borrowed by the ESOP from the Stock
Company. The amount to be borrowed is reflected as a reduction of
stockholders' equity. The Bank intends to make annual contributions to the
ESOP in an amount at least equal to the principal and interest requirement
of the debt. The Bank's total annual payment of the ESOP debt is based upon
10 equal annual installments of principal, with an assumed interest rate of
8.50%. The pro forma net earnings information makes the following
assumptions: (i) the Bank's contribution to the ESOP is equivalent to the
debt service requirement for a full year and was made at the end of the
period; (ii) 6,392, 7,520, 8,648 and 9,945 shares at the minimum, midpoint,
maximum and adjusted maximum of the Offering Range, respectively, were
committed to be released during the fiscal year ended June 30, 1997, at an
average fair value of $10.00 per share in accordance with Statement of
Position ("SOP") 93-6; and (iii) only the ESOP shares committed to be
released were considered outstanding for purposes of the net earnings per
share calculations. See "Management of the Bank--Employee Stock Ownership
Plan and Trust."
(3) Gives effect to the Recognition Plan expected to be adopted by the Stock
Company following the Offering. This plan intends to acquire a number of
shares of common stock equal to 4% of the shares sold in the Offering, or
31,960, 37,600, 43,240, and 49,726 shares of common stock at the minimum,
midpoint, maximum and adjusted maximum of the Offering Range, respectively,
either through open market purchases, or from authorized but unissued
shares of common stock or treasury stock of the Stock Company, if any.
Funds used by the Recognition Plan to purchase the shares will be
contributed to the plan by the Bank. In calculating the pro forma effect of
the Recognition Plan, it is assumed that the shares were acquired by the
plan in open market purchases at the beginning of the period presented for
a purchase price equal to the Subscription Price, and that 20% of the
amount contributed was an amortized expense during the period. The issuance
of authorized but unissued shares of the common stock to the Recognition
Plan instead of open market purchases would dilute the voting interests of
existing stockholders by approximately 4% and pro forma net earnings per
share would be $0.74, $0.65, $0.57 and $0.51 at the minimum, midpoint,
maximum and adjusted maximum of the Offering Range, respectively, and pro
forma stockholders' equity per share would be $8.99, $8.27, $7.74 and $7.29
at the minimum, midpoint, maximum and adjusted maximum of the Offering
Range, respectively. There can be no assurance that the actual purchase
price of the shares granted under the Recognition Plan will be equal to the
Subscription Price. See "Management of the Bank--Recognition Plan."
(4) No effect has been given to the issuance of additional shares of common
stock pursuant to the Stock Option Plan expected to be adopted by the Stock
Company following the Offering. Under the Stock Option Plan, an amount
equal to 10% of the common stock sold in the Offering, or 79,900, 94,000,
108,100 and 124,315 shares at the minimum, midpoint, maximum and adjusted
maximum of the Offering Range, respectively, will be reserved for future
issuance upon the exercise of options to be granted under the Stock Option
Plan. The issuance of common stock pursuant to the exercise of options
under the Stock Option Plan will result in the dilution of existing
stockholders' interests. Assuming all options were exercised at the end of
the period at an exercise price equal to the Subscription Price, existing
stockholders' voting interest would be diluted by 9.1%, and at the minimum,
midpoint, maximum and adjusted maximum of the Offering Range, the pro forma
net earnings per share would be $0.71, $0.62, $0.55 and $0.49,
respectively, and the pro forma stockholders' equity per share would be
$9.01, $8.31, $7.80 and $7.36, respectively. See "Management of the
Bank--Stock Option Plan."
(5) The retained earnings of the Bank will continue to be restricted after the
Offering. See "Dividend Policy" and "Regulation--Regulation of Savings
Institutions."
35
<PAGE>
PARTICIPATION BY MANAGEMENT
The following table sets forth information regarding intended common
stock subscriptions by each of the directors, trustees and executive officers of
the Bank, the Mutual Company and the Stock Company and their families, and by
all such directors, trustees and executive officers as a group. In the event the
individual maximum purchase limitation is increased, persons subscribing for the
maximum amount may increase their purchase order. This table excludes shares to
be purchased by the ESOP, and any Recognition Plan awards or stock option grants
that may be made no earlier than six months after the completion of the
Offering. See "Management of the Bank--Recognition Plan" and "--Stock Option
Plan."
<TABLE>
<CAPTION>
Percent of
Position Shares Issued
With the Stock in the
Name Company Total Shares(1) Aggregate Price Offering(2)
---- ------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
Eugene G. Stone President, Chief 5,000 $ 50,000 *
Executive Officer
and Director
Warren W. Chase, Jr. Vice President and 2,500 25,000 *
Treasurer
Michael A. Dalrymple Vice President 200 2,000 *
Kevin H. Kane Vice President 2,500 25,000 *
Pamela J. Mozynski Vice President 200 2,000 *
John J. Mogan, Jr. Vice President 2,500 25,000 *
Daniel G. Trombley Vice President 2,500 25,000 *
James W. Murphy Director and Clerk 5,000 50,000 *
Kelly A. Adler Director 10,000 100,000 1.1
Harold W. Bemis Director 250 2,500 *
William L. Casey Director 500 5,000 *
Paul J. DeSimone Director 100 1,000 *
John G. Dugan Director 2,500 25,000 *
Richard Giusti Director 5,000 50,000 *
John Hasenjaeger Director 10,000 100,000 1.1
Robert J. Heavey Director 5,000 50,000 *
Thomas R. Howie Director 200 2,000 *
Kenneth C.A. Isaacs Director 10,000 100,000 1.1
Paul V. Kenney Director 500 5,000 *
Eugene R. Liscombe Director 1,500 15,000 *
Robert A. Matson Director 500 5,000 *
Lawrence E. Novick Director 10,000 100,000 1.1
All directors, trustees and
executive officers as a group
(22 persons) 76,450 $764,500 8.1%
====== ======== ===
</TABLE>
- ----------------
* Less than 1%.
(1) The maximum number of shares for which any officer, trustee or director may
subscribe is 10,000 shares.
(2) At the midpoint of the Offering Range.
36
<PAGE>
THE OFFERING AND THE REORGANIZATION
The Division has approved the Offering of the common stock subject to
the satisfaction of certain conditions imposed by the Division. However, such
approval does not constitute a recommendation or endorsement of the Offering by
the Division.
Description of and Reasons for the Offering and the Reorganization
The Bank's Board of Directors and the Mutual Company's Board of
Trustees unanimously adopted the stock issuance plan and the Mutual Company's
corporators have approved it. Pursuant to the stock issuance plan, the Bank will
reorganize into what is called a "two-tier" mutual holding company structure. It
is a two-tier structure because it will have two levels of holding companies: a
"mid-tier" stock holding company and a "top-tier" mutual holding company. As
discussed more specifically below, the mid-tier Stock Company is being formed
primarily to facilitate (i) the sale of common stock in the Offering, and (ii)
the management of the Bank's capital following the Offering. Under the terms of
the stock issuance plan: (i) the Mutual Company will form the Stock Company as a
Massachusetts corporation; and (ii) the Mutual Company will contribute 100% of
the Bank's outstanding common stock to the Stock Company; and (iii) the Stock
Company will issue shares of common stock to the public and the Mutual Company.
These steps are referred to in this prospectus as the "reorganization." The
number of shares of common stock sold to the public pursuant to this prospectus
will be equal to 47% of the shares issued in the Offering, and the number of
shares issued to the Mutual Company will be equal to 53% of the shares issued in
the Offering. The sale of 47% of the common stock pursuant to this prospectus is
referred to as the "Offering." The two-tier mutual holding company structure is
most easily understood by considering the following diagram:
---------------- ------------
The Mutual Public
Company Stockholders
(a Massachusetts
mutual holding
company)
---------------- ------------
| |
| 53% of the | 47% of the
| common | common
| stock | stock
| |
-----------------------------------------------
The Stock Company (a Massachusetts corporation)
-----------------------------------------------
|
| 100% of the
| common stock
|
-----------------------------------------------
The Bank
(a Massachusetts stock savings bank)
-----------------------------------------------
The Bank reorganized into a mutual holding company structure in August
1997 by establishing the Mutual Company and the Bank in its current stock form.
The primary purpose in forming the Mutual Company was to create a stock charter
for the Bank, and to establish a structure that would enable the Bank to raise
additional equity capital and compete more effectively in the financial services
marketplace.
37
<PAGE>
The sole purpose of the reorganization of the Bank's existing mutual
holding company structure is to establish the Stock Company and to facilitate
the sale of common stock in the Offering. The two-tier structure will, among
other things: (i) enable the Stock Company to repurchase its common stock
without adverse tax consequences; (ii) permit the Stock Company to make
investments for the benefit of all stockholders; (iii) enable the Stock Company
to fund the loan to the ESOP; and (iv) provide greater flexibility in
structuring and approving mergers and acquisitions. The Bank did not form the
mid-tier Stock Company at the time of the formation of the Mutual Company in
August 1997 because Massachusetts regulations did not specifically authorize the
two-tier structure at that time.
The primary purpose of the Offering is to permit the Stock Company to
raise additional equity capital for growth and expansion of the Bank's
operations both internally and through the potential acquisition or
establishment of new branches or the acquisition of other financial
institutions. Since the Stock Company is not offering all of its common stock
for sale to depositors and the public in the Offering (but is issuing a majority
of its stock to the Mutual Company), the Offering will result in less capital
raised in comparison to a standard mutual-to-stock conversion. The mutual
holding company structure, however, will also offer the Bank the opportunity to
raise additional capital since the stock held by the Mutual Company will be
available for sale in the future in the event the Mutual Company decides to
convert to the capital stock form of organization in a Conversion Transaction.
See "Regulation--Holding Company Regulation--Conversion of the Mutual Company to
Stock Form."
Although the Stock Company will have the power to issue shares of
capital stock to persons other than the Mutual Company, as long as the Mutual
Company is in existence, the Mutual Company will be required to own a majority
of the voting stock of the Stock Company. The Stock Company may issue any amount
of non-voting stock to persons other than the Mutual Company and the Stock
Company must own 100% of the voting stock of the Bank. The Bank and the Stock
Company may issue any amount of non-voting stock or debt to persons other than
the Mutual Company.
Stock Pricing and Number of Shares to be Issued in the Offering
The shares of common stock will be issued at an aggregate purchase
price equal to the estimated pro forma market value of such stock based on an
independent appraisal of the Stock Company and the Bank prepared by RP
Financial, LC., an independent appraisal firm. RP Financial, LC. determined that
the estimated pro forma market value of the common stock as of May 29, 1998
ranged from $17.0 to $23.0 million, with a midpoint of $20.0 million. The shares
of common stock being sold in the Offering represent a minority ownership
interest in the outstanding common stock of the Stock Company equal to 47.0% of
the estimated pro forma market value of the common stock based on the
Independent Valuation. The aggregate purchase price of the common stock to be
sold in the Offering will range from $8.0 million to $10.8 million at a purchase
price of $10 per share. Following the commencement of the Offering, the maximum
of the Estimated Valuation Range may be increased by up to 15% to up to $26.5
million, which would result in a corresponding increase in the maximum of the
Offering Range to up to 1,243,150 shares, to reflect changes in market and
financial conditions, without a resolicitation of subscribers. No resolicitation
of subscribers will be made and subscribers will not be permitted to modify or
cancel their subscriptions unless the gross proceeds from the sale of the common
stock are less than the minimum or more than 15% above the maximum of the
Offering Range. Any adjustment of shares will have a corresponding effect on the
estimated net proceeds of the Offering and the pro forma capitalization and per
share data of the Stock Company. In addition to the shares of common stock to be
sold in the Stock Offering, 53% of the shares of common stock outstanding upon
the closing of the Offering will be issued to the Mutual Company.
Depending on market and financial conditions at the time of the
completion of the Offering, the Bank may increase or decrease the number of
shares to be issued in the Offering. If the change in the number of shares to be
issued in the Offering results in fewer than 799,000 shares or more than
1,081,000 shares being sold in the Offering, the Bank may also elect to
terminate the Offering. In the event that the Bank elects to terminate the
Offering, subscribers will receive a prompt refund of their purchase orders,
together with interest earned thereon, at
38
<PAGE>
the Bank's current passbook rate from the date of receipt to the date of
termination of the stock offering, and all authorizations for withdrawals of
deposits will be canceled. In the event the Bank receives orders for fewer than
799,000 at the discretion of the Board of Directors and subject to the approval
of the Division and the FRB, if necessary, the Bank may establish a new Offering
Range and resolicit subscribers. In the event of such a resolicitation,
subscribers will be permitted to modify or cancel their purchase orders. Any
adjustments in the pro forma market value of the Bank and the Stock Company as a
result of market and financial conditions, or a resolicitation of prospective
subscribers would be subject to Division approval. A resolicitation, if any,
following conclusion of the Offering would not extend beyond the Expiration
Date, without prior approval of the Division and the FRB, if necessary.
The number of shares of common stock to be offered in the Offering is
based upon the estimated pro forma market value of the common stock as
determined by the Independent Valuation, and the purchase price of the common
stock as determined by the Bank. Based on factors including the size of the
Offering, marketability of the shares to be sold in the Offering, expected
liquidity of the shares in the aftermarket, and community preference, the Bank
determined that the shares should be sold in the stock offering for $10.00 per
share. The number of shares issued will change in the event the Independent
Valuation changes when it is updated immediately prior to the consummation of
the Offering, but the purchase price is fixed at $10.00 per share and will not
change if the Independent Valuation changes.
RP Financial, LC., which is experienced in the valuation and appraisal
of business entities, including savings institutions, has been retained by the
Bank to prepare the Independent Valuation. RP Financial, LC. will receive a fee
of $20,000 for its appraisal, including subsequent updates, plus its reasonable
out-of-pocket expenses incurred in connection with the Independent Valuation.
The Bank has agreed to indemnify RP Financial, LC. under certain circumstances
against liabilities and expenses (including certain legal fees) arising from or
based upon the services provided by RP Financial, LC., except where the
liability is adjudicated to have resulted from RP Financial, LC.'s negligence or
willful misconduct.
The Independent Valuation was prepared by RP Financial, LC. in reliance
upon the information contained herein, including the consolidated financial
statements. The appraisal contains an analysis of a number of factors including,
but not limited to, the Bank's financial condition and operating trends, the
competitive environment in which the Bank operates, operating trends of certain
thrift institutions and savings and loan holding companies, relevant economic
conditions both nationally and in Massachusetts that affect the operations of
thrift institutions, and stock market values of certain institutions. RP
Financial, LC. has advised the Bank that it also has considered the effect of
the Minority Ownership Interest represented by the common stock in the Offering
in terms of liquidity of the common stock in the after-market, marketability of
the common stock, the proposed dividend policy, the possibility of conversion of
the Mutual Company to stock form, and other factors considered relevant. In
addition, RP Financial, LC. has advised the Bank that it has considered and will
consider the effect of the additional capital raised by the sale of the common
stock in the Offering on the estimated aggregate pro forma market value of such
shares.
On the basis of the foregoing, RP Financial, LC. has determined that as
of May 29, 1998, the estimated aggregate pro forma market value of the common
stock to be issued by the Stock Company was $20.0 million (the mid-point of the
Estimated Valuation Range). The Stock Company and the Bank have determined to
offer the shares in the Offering at a price of $10 per share. The Stock Company
and the Bank expect to sell a maximum of 47% of the Common Stock, or 940,000
shares (at the mid-point of the Offering Range), in the Offering. The Bank's
Board of Directors and the Stock Company's Board of Directors reviewed the
appraisal prepared by RP Financial, LC., and, in determining the reasonableness
and adequacy of such appraisal in consideration of FRB and Massachusetts
regulations and policies, has reviewed the methodology and reasonableness of the
assumptions utilized by RP Financial, LC. in the preparation of such appraisal.
The Board of Directors of the Bank and the Board of Directors of the Stock
Company have also considered the implied pricing of the shares based on the
appraised value and the range of the number of shares offered in the Offering.
In determining the Offering Range, the Boards
39
<PAGE>
reviewed RP Financial, LC.'s appraisal and, in particular, considered (i) the
Bank's financial condition and results of operations for the year ended June 30,
1997 and the nine months ended March 31, 1998, (ii) financial comparisons of the
Bank in relation to financial institutions of similar size and asset quality and
(iii) stock market conditions generally and in particular for financial
institutions, all of which are set forth in the appraisal. The Board also
reviewed the methodology and the assumptions used by RP Financial, LC. in
preparing its appraisal. As discussed above in this section, such number of
shares are subject to change if the Independent Valuation changes at the
conclusion of the Offering.
The Independent Valuation will be updated at the time of the completion
of the Offering, and the shares to be issued in the Offering may increase or
decrease to reflect the changes in market conditions, the estimated pro forma
market value of the Bank and the Stock Company, or both. If the updated estimate
of the pro forma market value of the Bank and the Stock Company immediately upon
conclusion of the Offering changes, there will be a corresponding change to the
number of shares to be issued in the Offering. Subscribers will not be given the
opportunity to change or withdraw their orders unless the Independent Valuation
changes by more than 15%, or if more than 1,243,150 shares or fewer than 779,000
shares are sold in the Offering. Any adjustment of shares of common stock sold
will have a corresponding effect on the estimated net proceeds of the Offering
and the pro forma capitalization and per share data of the Stock Company.
The Independent Valuation is not intended, and must not be construed,
as a recommendation of any kind as to the advisability of purchasing the common
stock. In preparing the Independent Valuation, RP Financial, LC. has relied upon
and assumed the accuracy and completeness of financial and statistical
information provided by the Bank. RP Financial, LC. did not independently verify
the financial statements and other information provided by the Bank, nor did RP
Financial, LC. value independently the assets and liabilities of the Bank. The
Independent Valuation considers the Stock Company and the Bank only as going
concerns and should not be considered as an indication of the liquidation value
of the Stock Company and the Bank. Moreover, because such Independent Valuation
is based upon estimates and projections on a number of matters, all of which are
subject to change from time to time, no assurance can be given that persons
purchasing the common stock will be able to sell such shares at a price equal to
or greater than the $10.00 per share purchase price.
No sale of shares of common stock may be consummated unless, prior to
such consummation, RP Financial, LC. confirms to the Stock Company and the Bank,
the FRB and the Division that, to the best of its knowledge, nothing of a
material nature has occurred that, taking into account all relevant factors,
would cause RP Financial, LC. to conclude that the Independent Valuation is
incompatible with its estimate of the pro forma market value of the common stock
of the Stock Company at the conclusion of the Offering. Any change that would
result in a market value that is below the minimum or 15% above the maximum of
the Offering Range would be subject to Division and FRB approval. If such
confirmation is not received, the Stock Company may extend the Offering, reopen
or commence a new offering, establish a new Offering Range and commence a
resolicitation of all purchasers with the approval of the Division and the FRB
or take such other actions as permitted by the Division and the FRB in order to
complete the Offering.
Subscription Offering
Subject to the limitations set forth in the "--Limitations upon
Purchases of Common Stock" section, the priorities for the purchase of Common
Stock in the subscription offering are as follows:
Priority 1: Eligible Account Holders. Each Eligible Account Holder
shall be given the opportunity to purchase up to $100,000 of common stock
offered in the Offering; provided that the Stock Company may, in its sole
discretion and without further notice to or solicitation of subscribers or other
prospective purchasers, increase such maximum purchase limitation to up to 5% of
the maximum number of shares offered in the Offering or decrease such maximum
purchase limitation to as low as 0.1% of the maximum number of shares offered in
the Offering, subject
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to the overall purchase limitation set forth in the section herein titled
"Limitations upon Purchases of Common Stock." If there are insufficient shares
available to satisfy all subscriptions of Eligible Account Holders, shares will
be allocated to Eligible Account Holders so as to permit each such subscribing
Eligible Account Holder to purchase a number of shares sufficient to make his
total allocation equal to the lesser of 100 shares or the number of shares
subscribed for. Thereafter, unallocated shares will be allocated pro rata to
remaining subscribing Eligible Account Holders whose subscriptions remain
unfilled in the same proportion that each such subscriber's aggregate deposit
account balances as of the Eligibility Record Date ("Qualifying Deposits") bears
to the total amount of Qualifying Deposits of all subscribing Eligible Account
Holders whose subscriptions remain unfilled. Subscription rights to purchase
common stock received by executive officers and directors of the Bank including
associates of executive officers and directors, based on their increased
deposits in the Bank in the one year preceding the Eligibility Record Date,
shall be subordinated to the subscription rights of other Eligible Account
Holders. To ensure proper allocation of stock, each Eligible Account Holder must
list on his subscription order form all deposit accounts in which he had an
ownership interest as of the Eligibility Record Date.
Priority 2: Supplemental Eligible Account Holders. To the extent there
are sufficient shares remaining after satisfaction of subscriptions by Eligible
Account Holders, each Supplemental Eligible Account Holder shall have the
opportunity to purchase up to $100,000 of common stock offered in the Offering;
provided that the Stock Company may, in its sole discretion and without further
notice to or solicitation of subscribers or other prospective purchasers,
increase such maximum purchase limitation to up to 5% of the maximum number of
shares offered in the Offering or decrease such maximum purchase limitation to
as low as 0.1% of the maximum number of shares offered in the Offering subject
to the overall purchase limitations set forth in the section herein titled
"Limitations upon Purchases of Common Stock." In the event Supplemental Eligible
Account Holders subscribe for a number of shares which, when added to the shares
subscribed for by Eligible Account Holders, exceed available shares, the shares
of common stock will be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each subscribing Supplemental Eligible Account
Holder to purchase a number of shares sufficient to make his total allocation
equal to the lesser of 100 shares or the number of shares subscribed for.
Thereafter, unallocated shares will be allocated to each subscribing
Supplemental Eligible Account Holder whose subscription remains unfilled in the
same proportion that such subscriber's aggregate deposit account balances as of
the Supplemental Eligibility Record Date ("Supplemental Qualifying Deposits")
bear to the total amount of Supplemental Qualifying Deposits of all subscribing
Supplemental Eligible Account Holders whose subscriptions remain unfilled.
Priority 3: Tax-Qualified Employee Plans. The tax-qualified employee
plans of the Bank, including the ESOP shall be given the opportunity to purchase
up to 10% of the common stock issued in the Offering. The ESOP intends to
purchase up to 8% of the Common Stock issued in the Offering. In the event of an
oversubscription in the Offering, subscriptions for shares by the ESOP may be
satisfied, in whole or in part, through open market purchases by the ESOP
subsequent to the closing of the Offering, subject to the maximum purchase
limitations set forth under "Limitations upon Purchases of Common Stock."
Priority 4: Employees, Officers, Directors and Trustees. To the extent
there are sufficient shares remaining after satisfaction of subscriptions by
Eligible Account Holders, Supplemental Eligible Account Holders, and the ESOP,
each employee, officer, director and trustee of the Mutual Company and the Bank
shall have the opportunity to purchase up to $100,000 of common stock offered in
the Offering; provided that the aggregate subscription rights granted to such
employees, officers, directors and trustees shall be limited to up to 30% of the
total number of shares of common stock sold in the Offering. Shares purchased
under this section shall be aggregated with shares purchased under the preceding
priority categories when calculating the 30% purchase limitation applicable to
purchases by such persons. Shares purchased under this section are also subject
to purchase limitations on management persons set forth in the section herein
titled "Limitations upon Purchases of Common Stock." For purposes of this
paragraph, directors shall not be deemed to be associates or a group acting in
concert solely as a result of their membership on the Board of Directors of the
Bank or the Board of Trustees of the Mutual Company. In the event that
employees, officers, directors and trustees subscribe under this section for
more shares of common stock than are available for purchase by them, the shares
of common stock available for purchase will be allocated by the Board of
Directors among such subscribing persons on an equitable basis, such as by
giving weight to the period of service, compensation and position of the
individual subscriber, provided that no fractional shares will be allocated or
issued.
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Community Offering
Any shares of common stock not subscribed for in the Subscription
Offering may be offered for sale in a Community Offering. This will involve an
offering of unsubscribed shares directly to the general public for the
Subscription Price of $10 per share. If a Community Offering is conducted, it
will be for a period of not more than 45 days unless extended by the Stock
Company and the Bank, and may begin concurrently with, during or promptly after
the Subscription Offering. No person, by himself or herself, or with an
associate or group of persons acting in concert, may subscribe for or purchase
more than $100,000 of common stock offered in the Community Offering. Further,
the Stock Company and the Bank may limit total subscriptions in the Community
Offering so as to assure that the number of shares available for the public
offering may be up to a specified percentage of the number of shares of common
stock.
In the event of an oversubscription for shares in the Community
Offering, shares may be allocated in the sole discretion of the Bank (to the
extent shares remain available) first to cover orders of natural persons
residing in the Bank's local community of Franklin, Medway, Medfield and Millis,
Massachusetts (the "Community"), then to cover the orders of any other person
subscribing for shares in the Community Offering so that each such person may
receive 1,000 shares, and thereafter, on a pro rata basis to such persons based
on the amount of their respective subscriptions.
The terms "residence," "reside," "resided" or "residing" as used herein
with respect to any person shall mean any person who occupied a dwelling within
the Community, has an intent to remain within the Community for a period of
time, and manifests the genuineness of that intent by establishing an ongoing
physical presence within the Community together with an indication that such
presence within the Community is something other than merely transitory in
nature. To the extent the person is a corporation or other business entity, the
principal place of business or headquarters shall be in the Community. To the
extent a person is a personal benefit plan, the circumstances of the beneficiary
shall apply with respect to this definition. In the case of all other benefit
plans, the circumstances of the director shall be examined for purposes of this
definition. The Bank may use deposit or loan records or such other evidence
provided to it to determine whether a person is a resident. In all cases,
however, such a determination shall be in the sole discretion of the Bank.
The Bank and the Stock Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any person. The Bank shall
have the right, in its sole discretion, to determine whether prospective
purchasers are "residents," "associates" or "acting in concert" as defined by
the stock issuance plan and in interpreting any and all other provisions of the
stock issuance plan. All such determinations are in the sole discretion of the
Bank and may be based on whatever evidence the Bank chooses to use in making any
such determination.
Syndicated Community Offering
Any shares of common stock not sold in the Subscription Offering or in
the Community Offering, if any, may be offered for sale to the general public by
a selling group of broker-dealers to be managed by Trident Securities, Inc. in a
Syndicated Community Offering, subject to terms, conditions and procedures as
may be determined by the Bank and the Stock Company in a manner that is intended
to achieve the widest distribution of the common stock subject to the rights of
the Stock Company to accept or reject in whole or in part all orders in the
Syndicated Community Offering. No person, together with associates or persons
acting in concert with such person, may purchase in the Syndicated Community
Offering more than $100,000 of common stock. It is expected that the Syndicated
Community Offering will commence as soon as practicable after termination of the
Subscription Offering and the Community Offering, if any. The Syndicated
Community Offering will be completed within 45 days after the termination of the
Subscription Offering, unless such period is extended as provided below.
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If for any reason a Syndicated Community Offering of unsubscribed
shares of common stock cannot be effected and any shares remain unsold after the
Subscription Offering and the Community Offering, if any, the Board of Directors
of the Stock Company and the Bank will seek to make other arrangements for the
sale of the remaining shares. Such other arrangements will be subject to the
approval of the Division and the FRB and to compliance with applicable state and
federal securities laws.
Restrictions on Agreements or Understandings Regarding Transfer of Common Stock
to be Purchased in the Offering
Prior to the completion of the Offering, no depositor may transfer or
enter into an agreement or understanding to transfer the legal or beneficial
ownership of the shares of common stock to be purchased by such person in the
Offering. Each depositor who submits an Order Form will be required to certify
that the purchase of common stock by such person is solely for the purchaser's
own account and there is no agreement or understanding regarding the sale or
transfer of such shares. The Bank intends to pursue any and all legal and
equitable remedies in the event it becomes aware of any such agreement or
understanding, and will not honor orders reasonably believed by the Bank to
involve such an agreement or understanding.
Procedure for Purchasing Shares
To ensure that each purchaser receives a prospectus at least 48 hours
before the Expiration Date, prospectuses will not be mailed any later than five
days prior to such date or hand delivered any later than two days prior to such
date. Order forms may only be distributed with a prospectus.
Expiration Date. The Offering will terminate at 12:00 noon,
Massachusetts time, on September____, 1998, unless extended by the Bank and the
Stock Company for up to an additional 45 days (i.e., until October __, 1998) or,
if approved by the Division, if necessary, for an additional period after such
extension. The Bank is not required to give purchasers notice of any extension
unless the offering period is extended beyond October __, 1998, in which event
purchasers will be given the right to increase, decrease, confirm, or rescind
their orders. If the minimum number of shares offered in the Offering (799,000
shares) is not sold by the Expiration Date, the Bank may terminate the Offering
and promptly refund all orders for common stock. If the number of shares is
reduced below the minimum of the Estimated Valuation Range, purchasers will be
given an opportunity to increase, decrease, or rescind their orders.
Use of Order Forms. In order to purchase the common stock, each
purchaser must complete an Order Form except for certain persons purchasing in
the Syndicated Community Offering as more fully described below. Any person
receiving an Order Form who desires to purchase common stock may do so by
delivering (by mail or in person) to the Bank a properly executed and completed
Order Form, together with full payment for the shares purchased. The Order Form
must be received prior to 12:00 noon, Massachusetts time, on September __, 1998.
Once tendered, an Order Form cannot be modified or revoked without the consent
of the Bank. Each person ordering shares is required to represent that they are
purchasing such shares for their own account. The interpretation by the Bank of
the terms and conditions of the stock issuance plan and of the acceptability of
the Order Forms will be final. The Bank is not required to accept copies of
Order Forms. Order Forms cannot and will not be accepted without the execution
of the certification appearing on the reverse side of the Order Form. Neither
the Bank, the Stock Company, nor Trident Securities, Inc. is obligated to
deliver a prospectus and an Order Form by any means other than the U.S. Postal
Service.
Payment for Shares. Payment for all shares will be required to
accompany all completed Order Forms for the purchase to be valid. Payment for
shares may be made by (i) check or money order, or (ii) authorization of
withdrawal from passbook or money market accounts or certificates of deposit
maintained with the Bank. Appropriate means by which such withdrawals may be
authorized are provided in the Order Forms. Once such a withdrawal amount has
been authorized, a hold will be placed on such funds, making them unavailable to
the depositor until the
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Offering has been completed or terminated. In the case of payments authorized to
be made through withdrawal from deposit accounts, all funds authorized for
withdrawal will continue to earn interest at the contract rate until the
Offering is completed or terminated. Interest penalties for early withdrawal
applicable to certificate accounts will not apply to withdrawals authorized for
the purchase of shares; however, if a withdrawal results in a certificate
account with a balance less than the applicable minimum balance requirement, the
certificate shall be canceled at the time of withdrawal without penalty, and the
remaining balance will earn interest at the Bank's passbook rate subsequent to
the withdrawal. In the case of payments made by check or money order, such
checks and money orders shall be made payable to "Service Bancorp, Inc." Such
funds will be placed in a segregated savings account and interest will be paid
by the Bank at the Bank's passbook rate, from the date payment is received until
the Offering is completed or terminated. Such interest will be paid by check, on
all funds held, including funds accepted as payment for shares of common stock,
promptly upon completion or termination of the Offering. An executed Order Form,
once received by the Bank, may not be modified, amended or rescinded without the
consent of the Bank, unless the Offering is not completed by __________, 1998,
in which event purchasers may be given the opportunity to increase, decrease,
confirm or rescind their orders for a specified period of time.
Owners of self-directed IRAs may use the assets of such IRAs to
purchase shares of common stock in the Offering. Individuals who are
participants in self-directed tax qualified plans maintained by self-employed
individuals ("Keogh Plans") may use the assets in their self-directed Keogh Plan
accounts to purchase shares of common stock in the Offering. In addition, the
provisions of ERISA and Internal Revenue Service ("IRS") regulations require
that executive officers, directors, and 10% stockholders who use self-directed
IRA funds and/or Keogh Plan accounts to purchase shares of common stock in the
Offering, make such purchase for the exclusive benefit of the IRA and/or Keogh
Plan participant.
If the ESOP purchases shares of common stock, such plan will not be
required to pay for such shares until consummation of the stock offering,
provided that there is in force from the time the order is received a loan
commitment to lend to the ESOP the amount of funds necessary to purchase the
number of shares ordered.
Delivery of Stock Certificates. Certificates representing common stock
issued in the stock offering will be mailed by the Bank to the persons entitled
thereto at the registration address noted on the Order Form, as soon as
practicable following consummation of the stock offering. Any certificates
returned as undeliverable will be held by the Bank until claimed by persons
legally entitled thereto or otherwise disposed of in accordance with applicable
law. Until certificates for the common stock are available and delivered to
purchasers, purchasers may not be able to sell the shares of stock which they
ordered. Subscribers are at their own risk if they sell shares before receiving
the certificates or determining whether their subscription has been accepted.
Plan of Distribution and Selling Commissions
Offering materials for the Offering initially have been distributed to
certain persons by mail, with additional copies made available at the Bank's
offices and by Trident Securities, Inc. All prospective purchasers are to send
payment directly to the Bank, where such funds will be held in a segregated
special escrow account and not released until the Offering is completed or
terminated.
To assist in the marketing of the common stock, the Bank and the Stock
Company have retained Trident Securities, Inc., a broker-dealer registered with
the NASD. Trident Securities, Inc. will assist the Bank in the Offering as
follows: (i) in training and educating the Bank's employees regarding the
mechanics and regulatory requirements of the Offering; (ii) in conducting
informational meetings for employees, customers and the general public; (iii) in
coordinating the selling efforts in the Bank's local communities; and (iv) in
soliciting orders for common stock. For these services, Trident Securities, Inc.
will receive an advisory and a management fee of 2% of the dollar amount of the
common stock sold in the Offering, excluding shares sold to the Bank's or the
Mutual Company's directors, trustees, officers, employees and employee benefit
plans, up to a maximum fee of $150,000.
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The Bank also will reimburse Trident Securities, Inc. for its
reasonable out-of-pocket expenses (including legal fees and expenses up to a
maximum of $27,500) associated with its marketing effort. The Bank has made an
advance payment to Trident Securities, Inc. in the amount of $10,000. The Bank
will indemnify Trident Securities, Inc. against liabilities and expenses
(including legal fees) incurred in connection with certain claims or litigation
arising out of or based upon untrue statements or omissions contained in the
offering materials for the common stock, including liabilities under the
Securities Act of 1933.
Directors, trustees and executive officers of the Bank, the Stock
Company and the Mutual Company may participate in the solicitation of offers to
purchase common stock. Other trained employees of the Bank may participate in
the Offering in ministerial capacities, providing clerical work in effecting a
sales transaction or answering questions of a ministerial nature. Other
questions of prospective purchasers will be directed to executive officers or
registered representatives. The Stock Company and the Bank will rely on Rule
3a4-1 of the Securities Exchange Act of 1934 (the "Exchange Act"), so as to
permit officers, directors, trustees and employees to participate in the sale of
the common stock. No officer, director, trustee or employee will be compensated
for his participation by the payment of commissions or other remuneration based
either directly or indirectly on the transactions in the common stock.
A Stock Information Center will be established at the Bank's main
office, in an area separated from the Bank's banking operations. Employees will
inform prospective purchasers to direct their questions to the Stock Information
Center and will provide such persons with the telephone number of the Stock
Information Center.
Other Restrictions. No person is entitled to purchase any common stock
to the extent such purchase would be illegal under any federal or state law or
regulation (including state "blue-sky" laws and regulations), or would violate
regulations or policies of the NASD, particularly those regarding free riding
and withholding. The Bank and/or its agents may ask for an acceptable legal
opinion from any purchaser as to the legality of such purchase and may refuse to
honor any such purchase order if such opinion is not timely furnished. The stock
issuance plan prohibits the Bank from lending funds or extending credit to any
persons to purchase common stock in the Offering.
Limitations upon Purchases of Common Stock
The following additional limitations have been imposed upon purchases
of shares of Common Stock. Defined terms used in this section and not otherwise
defined in this Prospectus shall have the meaning set forth in the stock
issuance plan.
1. The aggregate amount of outstanding common stock owned or controlled
by persons other than Mutual Company at the close of the Offering shall
not exceed 49% of the Stock Company's total outstanding common stock.
2. No person or group of persons acting in concert, may purchase more
than $100,000 of common stock offered in the Offering, except that: (i)
the Stock Company may, in its sole discretion and without further
notice to or solicitation of subscribers or other prospective
purchasers, increase such maximum purchase limitation to up to 5% of
the number of shares offered in the Offering; (ii) Tax-Qualified
Employee Plans may purchase up to 10% of the shares offered in the
Offering; and (iii) for purposes of this paragraph, shares to be held
by any Tax-Qualified Employee Plan and attributable to a person shall
not be aggregated with other shares purchased directly by or otherwise
attributable to such person.
3. The aggregate amount of common stock acquired in the Offering by all
Management Persons and their Associates, exclusive of any stock
acquired by such persons in the secondary market, shall not exceed 30%
of the outstanding shares of common stock held by persons other than
the Mutual Company at the close of the Stock offering. In calculating
the number of shares held by Management Persons and their Associates
under this paragraph or under the provisions of paragraph 4 below,
shares held by any Tax-Qualified Employee Benefit Plan or any
Nontax-Qualified Employee Benefit Plan of the Bank that are
attributable to such persons shall not be counted.
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4. The aggregate amount of common stock acquired in the Offering by all
Management Persons and their Associates, exclusive of any common stock
acquired by such persons in the secondary market, shall not exceed 30%
of the stockholders' equity of the Bank. In calculating the number of
shares held by Management Persons and their Associates under this
paragraph or under the provisions of paragraph 3 of this section,
shares held by any Tax-Qualified Employee Benefit Plan or any
Nontax-Qualified Employee Benefit Plan of the Bank that are
attributable to such persons shall not be counted.
5. With the approval of the Division, the Boards of Directors of the
Bank and the Stock Company may, in their sole discretion, increase the
maximum purchase limitation to up to 9.9%, provided that orders for
common stock in excess of 5% of the number of shares of common stock
offered in the Offering shall not in the aggregate exceed 10% of the
total shares of common stock offered in the Offering (except that this
limitation shall not apply to purchases by Tax-Qualified Employee
Plans). If such 5% limitation is increased, subscribers for the maximum
amount will be, and certain other large subscribers in the sole
discretion of the Stock Company and the Bank may be, given the
opportunity to increase their subscriptions up to the then applicable
limit. Requests to purchase additional shares of common stock under
this provision will be determined by the Board of Directors of the
Stock Company, in its sole discretion.
6. In the event of an increase in the total number of shares offered in
the Subscription Offering due to an increase in the maximum of the
Estimated Valuation Range of up to 15% (the "Adjusted Maximum"), the
additional shares will be issued, to fill unfulfilled subscriptions of
subscribers according to their respective priorities set forth in the
stock issuance plan.
7. Notwithstanding any other provision of the stock issuance plan, no
person shall be entitled to purchase any common stock to the extent
such purchase would be illegal under any federal law or state law or
regulation or would violate regulations or policies of the National
Association of Securities Dealers, Inc., particularly those regarding
free riding and withholding. The Stock Company and/or its agents may
ask for an acceptable legal opinion from any purchaser as to the
legality of such purchase and may refuse to honor any purchase order if
such opinion is not timely furnished.
8. The Boards of Directors of the Stock Company and the Bank have the
right in their sole discretion to reject any order submitted by a
person whose representations the Board of Directors believes to be
false or who it otherwise believes, either alone or acting in concert
with others, is violating, circumventing, or intends to violate, evade
or circumvent the terms and conditions of the stock issuance plan.
The Stock Company, in its sole discretion, may make reasonable efforts
to comply with the securities laws of any state in the United States in which
its depositors reside, and will only offer and sell the common stock in states
in which the offers and sales comply with such states' securities laws. However,
no person will be offered or allowed to purchase any common stock if they
resides in a foreign country or in a state of the United States with respect to
which any of the following apply: (i) a small number of persons otherwise
eligible to purchase shares under the stock issuance plan reside in such state
or foreign county; (ii) the offer or sale of shares of common stock to such
persons would require the Bank, the Stock Company or its employees to register,
under the securities laws of such state or foreign country, as a broker or
dealer or to register or otherwise qualify its securities for sale in such state
or foreign country; or (iii) such registration or qualification would be
impracticable for reasons of cost or otherwise.
Liquidation Account
At the completion of the Offering, the Bank or the Stock Company will
establish a liquidation account for the benefit of Eligible Account Holders and
Supplemental Eligible Account Holders who continue to maintain deposit accounts
with the Bank following the Offering. The amount of the liquidation account will
be equal to the Minority Ownership Interest multiplied by the net worth of the
Bank (determined in accordance with generally accepted accounting principles) as
set forth in the most recent statement of financial condition contained in this
prospectus.
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In the unlikely event of a complete liquidation of the Bank and the Stock
Company (and only in such event), each such account holder will be entitled to
receive a liquidating distribution from the liquidation account in the amount of
the then-adjusted account balances for such person's deposit accounts then held,
following all liquidation payments to creditors.
The initial account balance for each Eligible Account Holder and
Supplemental Eligible Account Holder shall be determined by multiplying the
opening balance in the liquidation account by a fraction, the numerator of which
is the amount of Qualifying Deposits held by such Eligible Account Holder or
Supplemental Eligible Account Holder on the Eligibility Record Date or the
Supplemental Eligibility Record Date, respectively, and the denominator of which
is the aggregate amount of all Qualifying Deposits on such dates. For deposit
accounts in existence on both dates, separate account balances shall be
determined on the basis of the Qualifying Deposits in such deposit accounts on
such dates.
If, however, on the last day of any fiscal year of the Bank commencing
after the Eligibility Record Date or Supplemental Eligibility Record Date, as
the case may be, the deposit balance in any deposit account of an Eligible
Account Holder or Supplemental Eligible Account Holder is less than either (i)
the amount of Qualifying Deposits of such Eligible Account Holder or
Supplemental Eligible Account Holder on the Eligibility Record Date or
Supplemental Eligibility Record Date, as the case may be, or (ii) the deposit
balance in such deposit account at the close of business on the last day of any
previous fiscal year of the Bank commencing after the Eligibility Record Date or
the Supplemental Eligibility Record Date, then such Eligible Account Holder's or
Supplemental Eligible Account Holder's account balance would be reduced in an
amount equal to the reduction in such deposit balance, and such account balance
will cease to exist if such deposit account is closed. In addition, no interest
in the liquidation account would ever be increased despite any subsequent
increase in the deposit balances of any Eligible Account Holder or Supplemental
Eligible Account Holder. Any assets remaining after the above liquidation rights
of Eligible Account Holders and Subsequent Eligible Account Holders are
satisfied would be distributed to the stockholders of the Bank.
Neither the Bank nor the Stock Company shall be required to set aside
funds for the purpose of establishing the liquidation account, and the creation
and maintenance of the account will not operate to restrict the use or
application of any of the net worth accounts of the Bank, except that neither
the Bank nor the Stock Company, as the case may be, shall declare or pay a cash
dividend on, or repurchase any of, its capital stock if the effect would cause
its net worth to be reduced below the amount required for the liquidation
account.
Federal and State Tax Consequences of the Reorganization
The Bank intends to proceed with the reorganization on the basis of an
opinion from its special counsel, Luse Lehman Gorman Pomerenk & Schick, P.C.,
Washington, D.C., as to certain tax matters that are material to the
reorganization. The opinion is based, among other things, on the assumptions
that the subscription rights to be received by Eligible Account Holders,
Supplemental Eligible Account Holders and others do not have any economic value
at the time of distribution or the time the subscription rights are exercised,
whether or not a Community Offering takes place. If the subscription rights
granted to Eligible Account Holders and Supplemental Eligible Account Holders
and certain others are deemed to have an ascertainable value, receipt of such
rights could result in taxable gain to such persons who exercise the
subscription rights in an amount equal to such value and the Bank could
recognize gain on such distribution. Persons who receive subscription rights are
encouraged to consult with their own tax advisors as to the tax consequences in
the event that such subscription rights are deemed to have an ascertainable
value. Unlike private letter rulings, opinions of counsel or tax advisors are
not binding on the IRS or the Massachusetts Department of Revenue, and either
agency could disagree with such opinions. In the event of such disagreement,
there can be no assurance that the Bank or the depositors would prevail in a
judicial proceeding.
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The Bank will receive an opinion of counsel from Luse Lehman Gorman
Pomerenk & Schick, P.C., to the effect that, for federal income tax purposes:
1. The reorganization qualifies as an exchange described in Code
Section 351.
2. The Mutual Company will recognize no gain or loss upon the
transfer of the stock of the Bank to the Stock Company solely in
exchange for Stock Company common stock. All other transferors
will recognize no gain or loss upon the transfer of property to
the Stock Company solely in exchange for common stock of the
Stock Company.
3. The Mutual Company's basis in the Stock Company common stock
received in the transaction will be equal to the basis of the
property transferred in exchange therefor.
4. The Mutual Company's holding period for the Stock Company common
stock received in the transaction will include the period during
which the property exchanged therefor was held, provided such
property was a capital asset or property described in Section
1231 of the Code on the date of the exchange.
5. The Stock Company will recognize no gain or loss upon its receipt
of property from the Mutual Company and Minority Stockholders in
exchange for common stock of the Stock Company.
6. The Stock Company's holding period for the property received from
the Mutual Company will include the period during which such
property was held by the Mutual Company.
7. Provided that the amount to be paid for the Stock Company common
stock pursuant to the subscription rights is equal to the fair
market value of such stock, no gain or loss will be recognized by
qualifying depositors, tax qualified employee plans of the Bank
and employees, officers, trustees and directors of the Mutual
Company and the Bank upon the distribution to them of
nontransferable subscription rights to purchase shares of Stock
Company common stock. Gain, if any, realized on the distribution
to them of nontransferable subscription rights to purchase shares
of Stock Company common stock will be recognized but only in an
amount not in excess of the fair market value of such
subscription rights.
8. The basis of the Stock Company common stock to the Minority
Stockholders will be the purchase price thereof plus the fair
market value, if any, of nontransferable subscription rights. The
Bank and the Mutual Company have received a letter from R.P.
Financial, LC. that the nontransferable subscription rights do
not have any value. Assuming the nontransferable subscription
rights have no value, the basis of the Stock Company common stock
will be the amount paid therefor.
The Bank has also received an opinion from Wolf & Company, P.C., that
implementation of the stock issuance plan will not result in any Massachusetts
income tax liability to the Bank, its depositors, tax qualified employee plans,
employees, officers, trustees and directors, the Stock Company or the Mutual
Company.
48
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
The following Consolidated Statements of Income of the Bank for each of
the years in the two-year period ended June 30, 1997 have been audited by Wolf &
Company, P.C., independent certified public accountants, whose report thereon
appears elsewhere in this prospectus. With respect to information for the nine
months ended March 31, 1998 and 1997, which is unaudited, in the opinion of
management, all adjustments necessary for a fair presentation of such periods
have been included and are of a normal recurring nature. Results for the nine
months ended March 31, 1998 are not necessarily indicative of the results that
may be expected for the year ending June 30, 1998. These statements should be
read in conjunction with the Consolidated Financial Statements and Notes thereto
and Management's Discussion and Analysis of Financial Condition and Results of
Operations included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
March 31, June 30,
------------------- --------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited)
(In Thousands)
Interest and dividend income:
<S> <C> <C> <C> <C>
Interest and fees on loans ............................................... $ 4,531 $ 3,923 $ 5,343 $ 4,539
Interest and dividends on securities available for sale
and Federal Home Loan Bank stock ....................................... 1,564 1,085 1,482 1,341
Interest on short-term investments and certificates of deposit ........... 214 139 212 222
------- ------- ------- -------
Total interest and dividend income ..................................... 6,309 5,147 7,037 6,102
------- ------- ------- -------
Interest expense:
Interest on deposits ..................................................... 2,733 2,238 3,050 2,724
Interest on borrowings ................................................... 239 86 124 22
------- ------- ------- -------
Total interest expense ................................................. 2,972 2,324 3,174 2,746
------- ------- ------- -------
Net interest income ......................................................... 3,337 2,823 3,863 3,356
Provision for loan losses (Note 4) .......................................... 75 35 35 93
------- ------- ------- -------
Net interest income, after provision for loan losses ................... 3,262 2,788 3,828 3,263
------- ------- ------- -------
Other income:
Customer service fees .................................................... 312 295 406 388
Gain on sales of securities available for sale, net (Note 3) ............. 675 343 462 308
Gain on sales of loan .................................................... 44 26 31 --
Miscellaneous ............................................................ 44 46 60 78
------- ------- ------- -------
Total other income ..................................................... 1,075 710 959 774
------- ------- ------- -------
Operating expenses:
Salaries and employee benefits (Note 10) ................................. 1,439 1,201 1,619 1,385
Occupancy and equipment expenses (Notes 5 and 11) ........................ 627 486 667 574
Data processing expenses ................................................. 250 198 258 270
Professional fees ........................................................ 116 96 124 124
Advertising expenses ..................................................... 88 45 68 53
Gain on other real estate owned .......................................... (6) (158) (158) --
Other general and administrative expenses (Note 14) ...................... 347 344 516 329
------- ------- ------- -------
Total operating expenses ............................................... 2,861 2,212 3,094 2,735
------- ------- ------- -------
Income before income taxes .................................................. 1,476 1,286 1,693 1,302
Provision for income taxes (Note 8) ......................................... 521 477 611 501
------- ------- ------- -------
Net income .................................................................. $ 955 $ 809 $ 1,082 $ 801
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
49
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Stock Company has only recently been formed and, accordingly, has
no results of operations. The Bank's results of operations depend primarily on
its net interest income, which is the difference between the income earned on
the Bank's loan and securities portfolios and its cost of funds, consisting of
the interest paid on deposits and borrowings. Results of operations are also
affected by the Bank's provision for loan losses, income and expenses pertaining
to other real estate owned, gains and losses from sales of securities, and
non-interest expenses. The Bank's non-interest expenses consist principally of
compensation and employee benefits, occupancy, equipment and data processing,
and other operating expenses. Results of operations are also significantly
affected by general economic and competitive conditions, changes in interest
rates, as well as government policies and actions of regulatory authorities.
Future changes in applicable law, regulations or government policies may
materially affect the Stock Company and the Bank.
Management Strategy
Historically, the Bank has focused on offering deposit products
primarily in the towns of Medway, Franklin, Medfield and Millis, all of which
are located in Norfolk County. The Bank's lending activities are concentrated
primarily in Norfolk County and nearby surrounding markets in the greater Boston
metropolitan area. The Bank generates its profitability primarily by
originating, purchasing and selling loans, investing in debt and equity
securities and mortgage-backed securities, attracting and retaining deposits by
paying competitive interest rates, borrowing from the Federal Home Loan Bank of
Boston ("FHLB") and maintaining a high standard of customer service as a local
community savings bank.
The Bank's strategy is to attempt to take advantage of favorable
conditions in its market area by continuing to grow the Bank, focus on
attracting core deposits and gradually shift its assets into higher yielding
loans. Norfolk County, which is located approximately 30 miles southwest of
Boston, has experienced population growth during the 1990's at a rate that is
almost twice the rate of growth for the Commonwealth of Massachusetts as a
whole. In particular, the town of Franklin experienced the greatest population
growth of any town in the Commonwealth from April 1, 1990 to July 1, 1996
according to the Massachusetts Institute for Social and Economic Research. This
growth is being driven by the area's proximity to Boston as convenient
transportation and more affordable housing have attracted many individuals who
work in the City of Boston. In addition, certain areas of the Bank's market area
have seen an expansion in commercial real estate development as a number of
small businesses have migrated to the area.
The Bank's growth has reflected that of its market area. Total assets
have increased 45.2% from $90.4 million at June 30, 1996 to $131.2 at March 31,
1998. During the same period, total loans grew 20.9% from $60.3 million to $72.9
million. Deposits also experienced significant growth, increasing 33.1% from
June 30, 1996 to March 31, 1998.
The principle elements of the Bank's strategy are as follows:
o Branching - Continue to explore branching opportunities either by
buying branches or de novo branching. The Bank opened one branch
in 1997 and is currently evaluating other opportunities.
o Increasing Commercial Real Estate and Business Lending - The Bank
believes that due to extensive consolidation among financial
institutions in the northeast, many small businesses are not
being adequately served. The Bank has been able to take advantage
of this opportunity as commercial real estate loans have more
than doubled since June 30, 1996 and currently represent 16.67%
of total
50
<PAGE>
loans, up from 9.72% of total loans. Likewise, commercial
business loans have also increased, from $2.7 million at June 30,
1996 to $3.5 million at March 31, 1998, an increase of 30.79%.
o Maintaining Adequate Staffing - Continued growth in the loan
portfolio will require additional experienced personnel in order
to properly and prudently manage this growth. In response, the
Bank has recently hired an experienced banker with more than 18
years of corporate credit analysis and lending experience to head
its commercial loan department.
o Maintaining High Asset Quality - At March 31, 1998 the Bank's
non-accrual loans and other real estate owned to total assets was
.26% and its allowance for loan losses as a percentage of
non-accrual loans was 163.27%.
o Attracting Core Deposits - At March 31, 1998 the Bank had $58.3
million of transaction accounts which represented 53.9% of total
deposits. The Bank believes that by offering attractive
depository products in conjunction with various business and
commercial real estate loans, it will be able to maintain a high
level of core deposits.
Management of Credit Risk
Management considers credit risk to be an important risk factor
affecting the financial condition and operating results of the Bank. The
potential for loss associated with this risk factor is managed through a
combination of policies approved by the Bank's Board of Directors, the
monitoring of compliance with these policies, and the periodic reporting and
evaluation of loans with problem characteristics. Policies relate to the maximum
amount that can be granted to a single borrower and such borrower's related
interests, the aggregate amount of loans outstanding by type in relation to
total assets and capital, loan concentrations, loan to collateral value ratios,
approval limits and other underwriting criteria. Policies also exist with
respect to performing credit reviews by an officer not involved in loan
origination, the rating of loans, when loans should be placed in a
non-performing status, and the factors that should be considered in establishing
the Bank's allowance for loan losses. See "Business of the Bank--Lending
Activities."
Management of Interest Rate Risk
Another important risk factor affecting the financial condition and
operating results of the Bank is interest rate risk. This risk is managed by
periodic evaluation of the interest rate risk inherent in certain balance sheet
accounts, determination of the level of risk considered appropriate given the
Bank's capital and liquidity requirements, business strategy, performance
objectives and operating environment, and maintenance of such risks within
guidelines approved by the Board of Directors. Through such management, the Bank
seeks to reduce the vulnerability of its operations to changes in interest
rates. The Bank's Asset/Liability Committee, comprised of senior management, is
responsible for managing interest rate risk and reviewing with the Board of
Directors on a quarterly basis its activities and strategies, the effect of
those strategies on the Bank's operating results, the Bank's interest rate risk
position, and the effect changes in interest rates would have on the Bank's net
interest income. The extent of movement of interest rates is an uncertainty that
could have a negative impact on the earnings of the Bank. See "Risk
Factors--Sensitivity to Changes in Interest Rates."
The principal strategies used by the Bank to manage interest rate risk
include (1) emphasizing the origination and retention of adjustable-rate loans
while generally selling long-term one- to four-family fixed-rate loans in the
secondary market, (2) originating fixed-rate commercial real estate loans with
maturities matched by long-term FHLB borrowings, (3) investing in debt
securities with relatively short maturities or call dates, (4) classifying all
of the Bank's investment portfolio as available for sale so as to provide
sufficient flexibility in liquidity management, and (5) maintaining a high
concentration of less interest-rate-sensitive and lower-costing "core deposits".
51
<PAGE>
Gap Analysis. The matching of assets and liabilities may be analyzed by
examining the extent to which such assets and liabilities are "interest rate
sensitive" and by monitoring a bank's interest rate sensitivity "gap." An asset
or liability is deemed to be interest rate sensitive within a specific time
period if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of
interest-earning assets maturing or repricing within a specific time period and
the amount of interest bearing-liabilities maturing or repricing within that
same time period. At March 31, 1998, the Bank's cumulative one-year gap
position, the difference between the amount of interest-earning assets maturing
or repricing within one year and interest-bearing liabilities maturing or
repricing within one year, was a negative 8.99%. A gap is considered positive
when the amount of interest rate sensitive assets exceeds the amount of interest
rate sensitive liabilities. A gap is considered negative when the amount of
interest rate sensitive liabilities exceeds the amount of interest rate
sensitive assets. Accordingly, during a period of rising interest rates, an
institution with a negative gap position generally would not be in as favorable
a position, compared to an institution with a positive gap, to invest in higher
yielding assets. The resulting yield on the institution's assets generally would
increase at a slower rate than the increase in its cost of interest-bearing
liabilities. Conversely, during a period of falling interest rates, an
institution with a negative gap would tend to experience a repricing of its
assets at a slower rate than its interest-bearing liabilities which,
consequently, would generally result in its net interest income growing at a
faster rate than an institution with a positive gap position.
The following table sets forth the amortized cost of interest-earning
assets and interest-bearing liabilities outstanding at March 31, 1998, which are
anticipated by the Bank, based upon certain assumptions, to reprice or mature in
each of the future time periods shown (the "GAP Table"). Except as stated below,
the amount of assets and liabilities shown which reprice or mature during a
particular period were determined in accordance with the earlier of term to
repricing or the contractual maturity of the asset or liability. The table sets
forth an approximation of the projected repricing of assets and liabilities at
March 31, 1998, on the basis of contractual maturities, anticipated prepayments
and scheduled rate adjustments within a three month period and subsequent
selected time intervals. The loan amounts in the table reflect principal
balances expected to be redeployed and/or repriced as a result of contractual
amortization and anticipated prepayments of adjustable-rate and fixed-rate
loans, and as a result of contractual rate adjustments on adjustable-rate loans.
The annual prepayment rate for loans (other than consumer loans) and
mortgage-backed securities is assumed to range between 8% and 12% depending upon
the type of loan, and the annual prepayment rate for consumer loans is assumed
to be 25%. See "Business of the Bank--Lending Activities," "--Investment
Activities" and "--Sources of Funds."
52
<PAGE>
<TABLE>
<CAPTION>
Amounts maturing or repricing at March 31, 1998
-------------------------------------------------------------------------------------------------
Less
Than Three 3-6 6 Months to 1-3 3-5 5-10 Over 10
Months Months 1 Year Years Years Years Years Total
------ ------ ------ ----- ----- ----- ----- -----
(Dollars in Thousands)
Interest-earning assets(1):
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans receivable (2) .......... $ 18,261 $ 6,803 $ 15,657 $ 21,849 $ 5,367 $ 4,577 $ -- $ 72,514
Short-term investments ........ 6,400 -- -- -- -- -- -- 6,400
Mortgage-backed securities .... 2,896 1,868 580 648 676 632 -- 7,300
Debt securities and
certificates of deposit ...... -- 500 1,000 500 3,000 26,507 2,000 33,507
Equity securities ............. -- -- -- -- -- -- 2,701 2,701
FHLB stock .................... -- -- -- -- -- -- 723 723
-------- -------- -------- -------- -------- -------- -------- --------
Total interest-earning assets 27,557 9,171 17,237 22,996 9,043 31,716 5,424 123,145
-------- -------- -------- -------- -------- -------- -------- --------
Interest-bearing liabilities:
Savings deposits (3)(4) ....... 2,810 2,810 2,810 2,810 -- -- 11,240 22,480
Money market deposits (3) ..... 1,082 1,082 1,082 1,082 -- -- 4,331 8,659
NOW deposits (5) .............. 3,137 3,137 3,137 3,137 -- -- 4,181 16,729
Certificate accounts .......... 13,395 14,619 14,258 7,443 72 -- -- 49,787
FHLB advances ................. 141 141 2,118 519 -- 9,000 485 12,404
-------- -------- -------- -------- -------- -------- -------- --------
Total interest-bearing
liabilities ................ $ 20,565 $ 21,789 $ 23,405 $ 14,991 $ 72 $ 9,000 $ 20,237 110,059
-------- -------- -------- -------- -------- -------- -------- --------
Interest sensitivity gap (6) .... $ 6,992 $(12,618) $ (6,188) $ 8,006 $ 8,971 $ 22,716 $(14,813)
======== ======== ======== ======== ======== ======== ========
Cumulative interest
sensitivity gap ............... $ 6,992 $ (5,626) $(11,794) $ (3,788) $ 5,183 $ 27,899 $ 13,086
======== ======== ======== ======== ======== ======== ========
Cumulative interest sensitivity
gap as a percentage of
total assets .................. 5.33% (4.29)% (8.99)% (2.89)% 3.95% 21.26% 9.97%
Cumulative interest sensitivity
gap as a percentage of
total interest-earning assets . 5.68% (4.57)% (9.57)% (3.08)% 4.21% 22.66% 10.66%
Cumulative interest-earning
assets as a percentage of
cumulative interest-bearing
liabilities ................... 134.00% 86.72% 82.06% 95.31% 106.41% 131.06% 111.89%
</TABLE>
- ----------------------
(1) Interest-earning assets are included in the period in which the balances
are expected to be redeployed and/or repriced as a result of anticipated
prepayments, scheduled rate adjustments and contractual maturities.
(2) For the purposes of the gap analysis, the allowance for loan losses,
deferred loan fees, unearned income, and non-accrual loans have been
excluded.
(3) 50% of regular savings and money market account balances is included in the
over 10 year period; the remaining 50% of such balances is spread evenly
within the four intervals up to and including the one- to three-year
period.
(4) Includes mortgagors' escrow payments.
(5) 25% of NOW account balances are included in the over 10 year period; the
remaining balances are spread evenly within the four intervals up to and
including the one- to three-year period.
(6) Interest sensitivity gap represents the difference between interest-earning
assets and interest-bearing liabilities.
53
<PAGE>
Certain shortcomings are inherent in the method of analysis presented
in the GAP Table. For example, although certain assets and liabilities may have
similar maturities or periods to repricing, they may react in different degrees
to changes in market interest rates. Also, the interest rates on certain types
of assets and liabilities may fluctuate in advance of changes in market interest
rates, while interest rates on other types may lag behind changes in market
rates. Additionally, certain assets such as adjustable-rate loans, have features
which restrict changes in interest rates both on a short-term basis and over the
life of the asset. Further, in the event of changes in interest rates,
prepayment and early withdrawal levels would likely deviate significantly from
those assumed in calculating the table. Finally, the ability of many borrowers
to service their adjustable-rate loans may decrease in the event of an interest
rate increase.
Analysis of Net Interest Income
Net interest income represents the difference between interest income
on interest-earning assets and interest expense on interest-bearing liabilities.
Net interest income also depends on the relative amounts of interest-earning
assets and interest-bearing liabilities and the interest rates earned or paid on
them.
54
<PAGE>
Average Balance Sheet. The following tables present, for the periods
indicated, the total dollar amount of interest income from average
interest-earning assets and the resultant yields, as well as the interest
expense on average interest-bearing liabilities, expressed both in dollars and
rates. No tax equivalent adjustments were made. All average balances are monthly
average balances. Non-accruing loans have been included in the table as loans
carrying a zero yield.
<TABLE>
<CAPTION>
Nine Months Ended March 31,
----------------------------------------------------------------
At March 31, 1998 1998 1997
-------------------- ------------------------------- ----------------------------
Interest Interest
Average Earned/ Average Earned/
Balance Yield/Rate Balance Paid Yield/Rate Balance Paid Yield/Rate
------- ---------- ------- ---- ---------- ------- ---- ----------
(Dollars in Thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans receivable (1)...... $72,197 8.52% $ 69,670 $4,531 8.67% $ 62,027 $3,923 8.43%
Mortgage-backed securities 7,300 5.90 3,450 171 6.61 1,971 101 6.83
Debt securities (2)....... 33,507 6.82 26,392 1,351 6.83 18,333 904 6.57
Equity securities......... 2,701 2.52 2,682 51 2.54 2,018 58 3.83
FHLB stock................ 723 6.40 588 28 6.35 468 22 6.27
Short-term investments 6,400 5.72 4,373 177 5.40 3,333 139 5.56
------- -------- ------ ------ ------
Total interest-earning assets 122,828 7.61 107,155 6,309 7.85 88,150 5,147 7.79
------ ------ ------
Non-interest-earning assets 8,376 6,941 5,406
------ ------ ------
Total assets............. $131,204 $114,096 $ 93,556
======== ======== ========
Interest-bearing liabilities:
Savings deposits (3)...... $22,480 2.49 $ 21,550 409 2.53 $ 20,406 386 2.52
Money market deposits..... 8,659 2.75 8,806 182 2.76 7,700 169 2.93
NOW accounts.............. 16,729 1.43 12,249 123 1.34 10,191 99 1.30
Certificate accounts...... 49,787 5.69 47,577 2,020 5.66 38,071 1,584 5.55
FHLB borrowings........... 12,404 5.27 5,648 238 5.62 2,003 86 5.72
------- -------- ------ ------ -----
Total interest-bearing
liabilities........... 110,059 4.11 95,830 2,972 4.14 78,371 2,324 3.95
------ ------ -----
Demand deposits............ 10,563 7,956 6,463
Other non-interest bearing
liabilities............... 692 972 868
Retained earnings.......... 9,870 9,338 7,854
------- -------- ------
Total liabilities and
retained earnings....... $131,204 $114,096 $ 93,556
======== ======== ========
Net interest income........ $3,337 $2,823
====== ======
Net interest spread........ 3.50% 3.71% 3.84%
===== ===== =====
Net earning assets......... $12,804 $ 11,325 $ 9,779
======= ======== ========
Net yield on average
interest-earning assets 3.93% 4.15% 4.27%
===== ===== =====
Average interest-earning assets
to average interest-bearing
liabilities............... 111.63% 111.82% 112.48%
======= ====== ======
</TABLE>
- -----------
(1) Calculated net of deferred loan fees, loan discounts, loans in process and
loss reserves.
(2) Debt securities include certificates of deposit.
(3) Savings deposits include mortgagors' escrow accounts.
55
<PAGE>
<TABLE>
<CAPTION>
Years Ended June 30,
------------------------------------------------------------
1997 1996
---------------------------- -----------------------------
Interest Interest
Average Earned/ Average Earned/
Balance Paid Yield/Rate Balance Paid Yield/Rate
------- ---- ---------- ------- ---- ----------
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Loans receivable (1)...... $63,009 $5,343 8.48% $51,785 $4,540 8.77%
Mortgage-backed securities 2,151 145 6.74 2,007 140 6.98
Debt securities (2)....... 18,367 1,222 6.65 17,383 1,106 6.36
Equity securities......... 2,234 86 3.85 2,066 66 3.19
FHLB stock................ 489 31 6.34 452 29 6.42
Short-term investments 3,792 210 5.54 3,615 221 6.11
------- ------ ------ ------
Total interest-earning
assets................. 90,042 7,037 7.82 77,308 6,102 7.89
------ ------
Non-interest earning assets 5,555 5,252
------- ------
Total assets............. $95,597 $82,560
======= =======
Interest-bearing liabilities:
Savings deposits (3)...... $20,637 521 2.52 $19,847 503 2.53
Money market deposits 7,854 225 2.86 8,272 229 2.77
NOW accounts.............. 10,429 135 1.29 9,900 154 1.56
Certificate accounts...... 39,042 2,169 5.56 32,017 1,838 5.74
FHLB advances............. 2,161 124 5.74 365 22 6.03
------- ------ ------- ------
Total interest-bearing
liabilities........... 80,123 3,174 3.96 70,401 2,746 3.90
------ ------
Demand deposits............ 6,638 4,825
Other non-interest bearing
liabilities.............. 870 274
Retained earnings.......... 7,966 7,060
------- -------
Total liabilities and
retained earnings....... $95,597 $82,560
======= =======
Net interest income........ $3,863 $3,356
====== ======
Net interest spread........ 3.86% 3.99%
===== ======
Net earning assets......... $ 9,919 $ 6,907
======= =======
Net yield on average
interest-earning assets 4.29% 4.34%
===== ======
Average interest-earning assets
to average interest-bearing
liabilities............... 112.38% 109.81%
====== ======
</TABLE>
- ----------
(1) Calculated net of deferred loan fees, loan discounts, loans in process and
loss reserves.
(2) Debt securities include certificates of deposit.
(3) Savings deposits include mortgagors' escrow accounts.
56
<PAGE>
Rate/Volume Analysis. The following table presents the dollar amount of
changes in interest income and interest expense for major components of
interest-earning assets and interest-bearing liabilities. It distinguishes
between the changes related to outstanding balances and that due to the changes
in interest rates. For each category of interest-earning assets and
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in volume (i.e., changes in volume multiplied by old rate) and (ii)
changes in rate (i.e., changes in rate multiplied by old volume). For purposes
of this table, changes attributable to both rate and volume, which cannot be
segregated, have been allocated proportionately to the change due to volume and
the change due to rate.
<TABLE>
<CAPTION>
Nine Months Ended March 31, Years Ended June 30,
------------------------------------- -----------------------------------
1998 vs. 1997 1997 vs. 1996
------------------------------------- -----------------------------------
Increase (Decrease) Increase (Decrease)
Due to Total Due to Total
-------------------- Increase ------------------- Increase
Volume Rate (Decrease) Volume Rate (Decrease)
------ ---- ---------- ------ ---- ----------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest and dividend income:
Loans receivable............... $ 494 $ 114 $ 608 $ 958 $ (154) $ 804
Mortgage-backed securities 73 (3) 70 13 (8) 5
Debt securities................ 410 37 447 64 51 115
Other.......................... 16 (17) (1) 8 14 22
Short-term investments......... 42 (4) 38 10 (21) (11)
-------- ------- ------- ------ -------- -------
Total........................ 1,035 127 1,162 1,053 (118) 935
-------- ------- ------- ------ -------- -------
Interest expense:
Savings deposits............... 21 2 23 20 (2) 18
Money market deposits.......... 23 (10) 13 (11) 7 (4)
NOW deposits .................. 21 3 24 13 (32) (19)
Certificate accounts........... 404 32 436 391 (60) 331
FHLB borrowings................ 154 (2) 152 103 (1) 102
-------- ------- ------- ------ -------- -------
Total........................ 623 25 648 516 (88) 428
-------- ------- ------- ------ -------- -------
Net interest income............. $ 412 $ 102 $ 514 $ 537 $ (30) $ 507
======== ======= ======= ====== ======== =======
</TABLE>
Comparison of Financial Condition at March 31, 1998 and June 30, 1997
Total assets increased by $26.3 million, or 25.1%, from $104.9 million
at June 30, 1997 to $131.2 million at March 31, 1998. This growth was due
primarily to a $14.6 million, or 63.6%, increase in investment securities, a
$5.3 million, or 7.9%, increase in net loans receivable and a $4.6 million, or
165.9%, increase in mortgage-backed securities. This asset growth was funded
primarily by a $15.2 million, or 16.3%, increase in deposits and a $9.8 million,
or 373.1%, increase in total borrowings at March 31, 1998 as compared to June
30, 1997.
The net increase in loans resulted from increased commercial real
estate loan originations reflecting strong economic growth in the Bank's primary
lending area. From June 30, 1997 to March 31, 1998, commercial real estate loans
increased by $3.8 million, or 45.6%, construction or development loans increased
by $982,000, or 34.1%, and commercial business loans increased by $971,000, or
38.0%. These increases were partially offset by a modest reduction in one- to
four-family residential mortgage loans of $1.5 million, or 3.1%, from June 30,
1997 to March 31, 1998 due to refinancing activities.
At March 31, 1998, the Bank's total investment securities were $37.6
million, an increase from the Bank's total investment securities of $23.0
million at June 30, 1997. All of such investment securities are classified by
the Bank as available for sale. In addition, short-term investments increased
$95,000 to $6.4 million at March 31, 1998 compared to June 30, 1997, while
mortgage-backed securities increased by $4.6 million to $7.3 million over the
same period. The increase in investment securities and mortgage-backed
securities during the period from June 30, 1997
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to March 31, 1998 were funded largely by FHLB advances, which increased to $12.4
million at March 31, 1998 compared to $2.6 million at June 30, 1997, as
management sought to increase net interest income by taking advantage of the
favorable spread between the yield on the securities and the cost of the FHLB
advances. The securities are all classified as available for sale; if and to the
extent that the FHLB advances are called, management may sell such securities to
fund growth in the loan portfolio to the extent necessary.
Total deposits at March 31, 1998 were $108.1 million, an increase of
$15.2 million, or 16.3%, compared to $92.9 million at June 30, 1997. The
increase in deposits was attributable primarily to increases in demand deposits,
NOW accounts and certificate of deposit accounts, the average balances of which
increased by $1.3 million, or 19.9%, $1.8 million, or 17.5% and $8.5 million, or
21.9%, respectively, for the nine months ended March 31, 1998 as compared to the
twelve months ended June 30, 1997. Total borrowed funds increased to $12.4
million at March 31, 1998 compared to $2.6 million at June 30, 1997. The
increases in total deposits and in borrowed funds were utilized to fund the
increases in total assets described above.
The Bank's retained earnings increased by $1.2 million, or 13.5%, to
$9.9 million at March 31, 1998 compared to $8.7 million at June 30, 1997. The
increase in retained earnings resulted from net income of $955,000 for the nine
months ended March 31, 1998 and a $240,000 increase in unrealized gains (net of
taxes) on securities available for sale. The increase in unrealized gains on
securities available for sale was attributable, in part, to continued strength
in U.S. equities markets generally; there can be no assurance that such gains
will continue in future periods.
Comparison of Financial Condition at June 30, 1997 and June 30, 1996
Total assets were $104.9 million at June 30, 1997 compared to $90.4
million at June 30, 1996, an increase of $14.5 million, or 16.1%. This growth in
total assets reflected growth in net loans, which increased by $7.3 million, or
12.2%, short-term investments, which increased by $3.7 million, or 142.8%,
investment securities, which increased by $3.8 million, or 19.9%, and
mortgage-backed securities, which increased by $669,000, or 32.2%. Asset growth
was funded primarily by deposits, which increased by $11.7 million, or 14.4%,
total borrowings, which increased to $2.6 million from $369,000, and retained
earnings, which increased by $1.3 million, or 17.2%.
Net loans increased from $59.7 million at June 30, 1996 to $66.9
million at June 30, 1997. In the twelve months ended June 30, 1997, one- to
four-family residential mortgage loans increased by $4.4 million, or 10.3% and
commercial real estate loans increased by $2.5 million, or 42.4%. The increases
in net loans in these categories more than offset a modest decrease of $274,000,
or 8.7%, in construction and development loans, and reflected the economic
strength and loan demand in the Bank's primary lending area.
Total investments also increased in the twelve months ended June 30,
1997. The Bank's investment securities increased by $3.8 million, or 19.9%, to
$23.0 million at June 30, 1997 compared to $19.2 million at June 30, 1996, and
the Bank's short-term investments increased to $6.3 million at June 30, 1997
compared to $2.6 million at June 30, 1996. In addition, mortgage-backed
securities increased to $2.7 million from $2.1 million over the same period.
Total deposits increased by $11.7 million, or 14.4%, to $92.9 million
at June 30, 1997 from $81.2 million at June 30, 1996. Substantially all of the
growth in total deposits came from a $3.4 million, or 34.8% increase in NOW
accounts and a $7.5 million, or 21.2%, increase in total certificate accounts.
The Bank also increased its borrowings from the FHLB to $2.6 million at June 30,
1997 from $369,000 at June 30, 1996 as part of its management of interest rate
risk resulting from the origination and refinancing of commercial real estate
loans at fixed interest rates for certain time intervals.
The increase in retained earnings to $8.7 million at June 30, 1997 from
$7.4 million at June 30, 1996 resulted from net income of $1.1 million for the
twelve months ended June 30, 1997 and a $192,000 increase in unrealized
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<PAGE>
gains (net of taxes) on securities available for sale. The increase in
unrealized gains on securities available for sale was attributable, in part, to
continued strength in U.S. equities markets generally; there can be no assurance
that such gains will continue in future periods.
Comparison of Operating Results for the Nine Months Ended March 31, 1998 and
March 31, 1997
General. Net income increased by $146,000, or 18.0%, from $809,000 for
the nine months ended March 31, 1997 to $955,000 for the nine months ended March
31, 1998. The improvement was attributable to higher net interest income of $3.3
million (compared to $2.8 million in the earlier period) and a $719,000 gain on
the sale of loans and investment securities (compared to a $369,000 gain in the
earlier period). These improvements more than offset the increase of $649,000,
or 29.3%, in total noninterest expense for the nine months ended March 31, 1998
compared to the year earlier period.
Interest Income. Interest income for the nine months ended March 31,
1998 was $6.3 million compared to $5.1 million for the nine months ended March
31, 1997. The increase was attributable to a substantial increase in average
interest earning assets of $19.0 million, or 21.6% for the nine months ended
March 31, 1998 compared to the earlier year period, as well as an improvement in
the average yield on interest earning assets to 7.85% for the nine months ended
March 31, 1998 compared to 7.79% for the nine months ended March 31, 1997. The
principal areas of growth in average balances related to loans receivable (up
$7.6 million, or 12.3%) and investment securities (up $8.1 million, or 44.0%).
The increase in loans receivable reflected loan demand in the Bank's primary
lending area, and the increase in the average balance of investment securities
reflected management's decision to increase liquidity in anticipation of further
growth in the Bank's primary lending market.
Interest Expense. Interest expense for the nine months ended March 31,
1998 was $3.0 million compared to $2.3 million for the nine months ended March
31, 1997, an increase of $648,000, or 27.9%. The increase resulted from both a
higher average balance of interest-bearing liabilities (which increased by $17.5
million, or 22.3%) as well as an increase in the average rate paid for funds to
4.14% for the nine months ended March 31, 1998 compared to 3.95% for the nine
months ended March 31, 1997. The increase in average interest-bearing deposit
balances reflected increases in both transaction accounts and certificate
accounts. In particular, the average balance of certificate accounts increased
to $47.6 million for the nine months ended March 31, 1998 compared to $38.1
million for the earlier nine month period, as the Bank increased the rates paid
on such accounts to fund asset growth. The Bank also expanded its use of
borrowings from the FHLB both to fund asset growth as well as to facilitate
management of interest rate risk and may continue to do so in the future for
both purposes. Interest expense on borrowed funds increased for the nine months
ended March 31, 1998 compared to the earlier period, reflecting increased
average balances of such borrowings, notwithstanding a reduction in the rate
paid on such borrowings to 5.62% for the nine months ended March 31, 1998
compared to 5.72% for the nine months ended March 31, 1997.
Provision for Loan Losses. The Bank had a provision for loan losses of
$75,000 for the nine months ended March 31, 1998 compared to $35,000 for the
nine months ended March 31, 1997. This increase reflected a desire by management
to keep the allowance for loan losses at a level to properly match loan growth
and to reset general reserves for certain loan categories. The ratio of
non-accruing loans and other real estate owned to total assets at the end of the
nine month period ended March 31, 1998 was 0.26% compared to 0.69% at the end of
the nine months ended March 31, 1997. The allowance for loan losses was $560,000
at March 31, 1998 and $539,000 at March 31, 1997, or 0.77% and 0.84% of net
loans receivable, respectively. During the nine months ended March 31, 1998, the
Bank experienced net recoveries of $10,000, compared to net recoveries of
$34,000 for the nine months ended March 31, 1997. While management believes
that, based on information currently available, the Bank's allowance for loan
losses is sufficient to cover losses inherent in its loan portfolio at this
time, no assurances can be given that the level of the Bank's allowance will be
sufficient to cover future loan losses incurred by the Bank or that future
adjustments to the allowance will not be necessary if economic and/or other
conditions differ substantially from the economic and other conditions
considered by management in evaluating the adequacy of the current level of the
allowance. In addition to the periodic evaluations made by management, various
regulatory agencies, as an integral part of their
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examination process, periodically review the Bank's allowance for loan losses.
Such agencies may require the Bank to provide additions to the allowance based
upon judgements differing from those of management.
Non-Interest Income. Noninterest income is comprised of fees and
charges for Bank services, gains or losses from the sale of assets, other real
estate owned activity and other income resulting from miscellaneous
transactions. Total noninterest income was $1.1 million for the nine months
ended March 31, 1998 compared to $710,000 for the nine months ended March 31,
1997. The increase resulted primarily from $719,000 in gains on sales of loans,
mortgage-backed securities and investment securities for the nine months ended
March 31, 1998 compared to $369,000 in such gains for the nine months ended
March 31, 1997. The Bank actively manages a portfolio of equity securities
which, since June 30, 1996, has ranged in size from $2.6 million to $3.3
million, all of which securities are classified as available for sale. There can
be no assurances that gains from the management of these securities will
continue to contribute to the Bank's interest income in future periods.
Non-Interest Expense. Noninterest expense increased by $649,000 to $2.9
million for the nine months ended March 31, 1998 compared to $2.2 million for
the nine months ended March 31, 1997. Of this increase, $238,000 related to
salaries and employee benefits, which rose 19.8%. The higher level of
compensation and employee benefits was attributable primarily to the opening of
a new full-service branch office in Franklin, Massachusetts during August 1997
as well as increased pension, group health and training expenses. The Bank
expects compensation and employee benefits expense to increase significantly
after the Offering, primarily as a result of adoption of various employee
benefit plans in connection with the Offering. In this regard, the proposed
ESOP, which intends to purchase 8% of the Common Stock issued in the Offering
and the Recognition and Retention Plan which, if implemented, would purchase an
amount of Common Stock equal to 4% of the Common Stock issued in the Offering,
would result in increased compensation and employee benefits expense as the
amortization of the ESOP loan and the Recognition Plan awards would be reflected
as compensation expense. See "Management of the Stock Bank--Compensation of
Officers and Directors through Benefit Plans--Employee Stock Ownership Plan and
Trust." Other non-interest expenses increased $411,000, or 40.7%, to $1.4
million for the nine months ended March 31, 1998 compared to the earlier year
period primarily due to increases in advertising and data processing expenses to
promote and process new bank products and services, and increases in occupancy
and equipment expenses attributable to the new full-service branch office in
Franklin, Massachusetts.
Income Taxes. Income tax expense for the nine months ended March 31,
1998 was $521,000, compared to $477,000 for the nine months ended March 31,
1997, resulting in effective tax rates of 35.3% and 37.1% for the respective
periods. The effective tax rate reflects the utilization by the Bank of a
securities investment subsidiary to substantially reduce state income taxes. See
"Business of the Bank--Subsidiary Activities."
Comparison of Operating Results for the Fiscal Years Ended June 30, 1997 and
June 30, 1996
General. Net income was $1.1 million for the twelve months ended June
30, 1997 ("Fiscal 1997") compared to $801,000 for the twelve months ended June
30, 1996 ("Fiscal 1996"). The increase in net income reflected an increase in
net interest income of $507,000, or 15.1% in Fiscal 1997 compared to Fiscal 1996
as well as an increase of $185,000, or 23.9%, in total noninterest income in
Fiscal 1997 compared to Fiscal 1996. The improvements in these areas more than
offset the increase in noninterest expense of $359,000, or 13.1%, in Fiscal 1997
compared to Fiscal 1996.
Interest Income. Interest income was $7.0 million in Fiscal 1997
compared to $6.1 million in Fiscal 1996, an increase of $935,000, or 15.3%. The
increase reflected an increase of $12.7 million in average interest earning
assets, which more than offset a slight decline in the yield on interest-earning
assets to 7.82% in Fiscal 1997 compared to 7.89% in Fiscal 1996. The increase in
interest income on the Bank's loan portfolio of $803,000, or 17.7%, reflected
substantially increased average balances of such loans to $63.0 million in
Fiscal 1997 compared to $51.8 million in Fiscal 1996. This more than offset any
lower yields paid on such assets in Fiscal 1997 resulting from lower
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market interest rates and the fact that a significant portion of the Bank's
mortgage loans was refinanced at lower fixed rates.
Interest Expense. Interest expense increased by $428,000, or 15.6%, to
$3.2 million in Fiscal 1997 compared to $2.7 million in Fiscal 1996. The
increase resulted primarily from substantially higher average balances of
certificate accounts, which increased to $39.0 million in Fiscal 1997 from $32.0
million in Fiscal 1996, as well as substantially higher average balances of
total borrowings, which increased to $2.2 million in Fiscal 1997 compared to
$365,000 in Fiscal 1996. However, because the rates paid on these categories of
interest-bearing liabilities decreased in Fiscal 1997 versus Fiscal 1996, the
average rate paid on total interest-bearing liabilities remained relatively
stable at 3.96% for Fiscal 1997 compared to 3.90% for Fiscal 1996.
Provision for Loan Losses. The Bank's provision for loan losses in
Fiscal 1997 decreased to $35,000 as compared to $93,000 in Fiscal 1996. The
decrease reflected the continued low level of nonperforming assets, which
decreased to 0.22% of the Bank's total assets at the end of Fiscal 1997 compared
to 0.99% of the Bank's total assets at the end of Fiscal 1996. Net loan
charge-offs in Fiscal 1997 amounted to $30,000 compared to $68,000 in Fiscal
1996. The allowance for loan losses was $475,000 at the end of Fiscal 1997,
compared to $470,000 at the end of Fiscal 1996.
Noninterest Income. Total noninterest income was $959,000 in Fiscal
1997 compared to $774,000 in Fiscal 1996, an increase of $185,000, or 23.9%. The
increase was attributable to modest increases in customer service fees and to
$493,000 in gains on sales of loans and securities available for sale in Fiscal
1997 compared to $308,000 in such gains in Fiscal 1996.
Noninterest Expense. Total noninterest expense was $3.1 million in
Fiscal 1997 compared to $2.7 million in Fiscal 1996, an increase of $359,000, or
13.1%. The increase reflected increases in salaries and employee benefits (up
$234,000 or 16.9%) and occupancy and equipment expenses (up $93,000 or 16.2%).
In addition, other general and administrative expenses increased by $187,000, or
56.8%, due to increases in supplies and ATM processing, as well as contribution
expenses, which increased due to the formation of the Bank's charitable
foundation. These increases were partially offset by a $158,000 gain on
foreclosed real estate in Fiscal 1997.
Income Taxes. Total income tax expense was $611,000 in Fiscal 1997
compared to $501,000 in Fiscal 1996. The effective tax rate was lower in 1997
(36.1%) than in 1996 (38.5%) due to the greater portion of 1997's net income
attributable to gains in securities trading, which were taxed at a lower rate
due to the Bank's Massachusetts security corporation.
Liquidity and Capital Resources
The Bank's primary sources of funds are deposits, principal and
interest payments on loans and debt securities and borrowings from the FHLB.
While maturities and scheduled amortization of loans are predictable sources of
funds, deposit flows and mortgage prepayments are greatly influenced by interest
rate trends, economic conditions and competition.
Total assets increased by $26.3 million, $14.5 million, and $13.2
million for the nine months ended March 31, 1998 and the twelve months ended
June 30, 1997 and 1996, respectively. These increases included $5.3 million,
$7.3 million and $11.9 million, respectively, of growth in the loan portfolio.
During the past few years, the combination of generally low interest
rates on deposit products and the attraction of alternative investments such as
mutual funds and annuities has significantly affected deposit flows. However,
the Bank experienced a $15.2 million net deposit inflow for the nine months
ended March 31, 1998 and net deposit inflows of $11.7 million, and $11.6 million
for the twelve months ended June 30, 1997 and 1996, respectively. The Bank
expanded the use of borrowings from the FHLB by $9.8 million, $2.3 million, and
$98,000,
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during the nine months ended March 31, 1998 and the twelve months ended June 30,
1997 and 1996, respectively. At March 31, 1998, total borrowings from the FHLB
amounted to $12.4 million and the Bank had the capacity to increase that total
to $41.8 million. Depending on market conditions and the Bank's liquidity and
GAP position, the Bank may continue to borrow from the FHLB.
The Bank's most liquid assets are cash and due from banks, short-term
investments, and debt securities. The levels of these assets are dependent on
the Bank's operating, financing, lending and investment activities during any
given period. At March 31, 1998, cash and due from banks, short-term
investments, and debt securities maturing within one year amounted to $13.1
million, or 10.0% of total assets.
At March 31, 1998, the Bank had commitments to originate loans, unused
outstanding lines of credit and undisbursed proceeds of loans totaling $13.8
million. The Bank anticipates that it will have sufficient funds available to
meets its current loan commitments. Certificates of deposit maturing within one
year from March 31, 1998 amounted to $42.3 million. The Bank expects that
substantially all of the maturing certificate accounts will be retained by the
Bank at maturity.
At March 31, 1998, the Bank exceeded all of its regulatory requirements
with a Tier 1 capital of $9.5 million, or 7.78% of adjusted assets, which is
above the required level of $4.9 million, and total capital of $10.0 million, or
14.39% of risk-weighted assets, which is above the required level of $5.6
million, or 8.00%. See "Regulation--Regulatory Capital Requirements" and
"--Insurance of Accounts and Regulation by the FDIC."
Impact of Inflation and Changing Prices
The Consolidated Financial Statements and Notes thereto presented
herein have been prepared in accordance with GAAP, which require the measurement
of financial position and operating results in terms of historical dollar
amounts without considering the changes in the relative purchasing power of
money over time due to inflation. The impact of inflation is reflected in the
increased cost of the Bank's operations. Unlike industrial companies, nearly all
of the assets and liabilities of the Bank are monetary in nature. As a result,
interest rates have a greater impact on the Bank's performance than do the
effects of general levels of inflation. Interest rates do not necessarily move
in the same direction or to the same extent as the price of goods and services.
Impact of New Accounting Standards
Reporting Comprehensive Income. In June 1997, the FASB issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"). This Statement requires entities presenting a complete set of
financial statements to include details of comprehensive income that arise in
the reporting period. Comprehensive income consists of net income or loss for
the current period and other comprehensive income consisting of revenue,
expenses, gains and losses that bypass the income statement and are reported
directly in a separate component of equity. Other comprehensive income includes,
for example, unrealized gains and losses on certain investment securities,
minimum pension liability adjustments and foreign currency items. SFAS No. 130
requires that components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. At March 31, 1998, the Bank's other comprehensive income consisted
of unrealized gains on securities classified as available for sale. This
Statement is effective for fiscal years beginning after December 31, 1997 and
requires restatement of prior period financial statements presented for
comparative purposes.
Disclosures about Segments of an Enterprise and Related Information. In
June 1997, the FASB issued Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131"). This Statement changes the current practice for reporting segment
information under SFAS No. 14, "Financial Reporting for Segments of an
Enterprise." Public entities are required to report financial and descriptive
information about their reportable operating segments. An operating segment is a
component of an
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entity for which financial information is developed and evaluated by the
entity's chief operating decision maker to assess performance and to make
decisions about resource allocation. Disclosures about operating segments should
generally be based on the information used internally. This Statement is
effective for financial statements for periods beginning after December 15,
1997. On adoption, comparative information for earlier years is to be restated.
Based on current operations, the Stock Company does not believe adoption of this
Statement will have any impact on its public financial reporting.
Employers' Disclosures about Pensions and Other Postretirement
Benefits. In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," which standardizes the disclosure requirements for
pensions and other postretirement benefits, requires additional information on
changes in the benefit obligations and fair values of plan assets that will
facilitate financial analysis, and eliminates certain disclosures that the FASB
no longer considers as useful as when they were issued. This statement suggests
combined formats for presentation of pension and other postretirement benefit
disclosures. This statement is effective for fiscal years beginning after
December 15, 1997.
Accounting for Derivative Instruments and Hedging Activities. In June
1998, the FASB issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This Statement
requires that all derivatives be recognized at fair value as either assets or
liabilities on the balance sheet. If certain conditions are met, a derivative
may be specifically designated as (a) a hedge of the exposure to changes in the
fair value of a recognized asset or liability or an unrecognized firm
commitment, (b) a hedge of the exposure to variable cash flows of a forecasted
transaction, or (c) a hedge of the foreign currency exposure of a net investment
in a foreign operation, an unrecognized firm commitment, an available-for-sale
security or a foreign-currency-denominated forecasted transaction. The
accounting for changes in fair value of a derivative depends on the intended use
of the derivative and the resulting designation. This Statement generally
provides for matching the timing of a gain or loss recognition on the hedging
instrument with the recognition of (a) the changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk or (b) the
earnings effect of the hedged forecasted transaction. This Statement is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999,
with earlier application encouraged. Retroactive application to prior periods is
prohibited. The Bank does not generally use derivative instruments and therefore
the adoption of the Statement is not expected to have a material impact on the
financial statements of the Stock Company.
BUSINESS OF THE COMPANY
General
As part of the Reorganization, the Stock Company has been established
as a majority-owned subsidiary of the Mutual Company. The Stock Company is
currently not an operating company. Following the Reorganization and the
Offering, in addition to directing, planning and coordinating the business
activities of the Bank, the Stock Company will initially invest up to 50% of the
net proceeds primarily in short- and medium-term fixed-income securities. The
Stock Company also intends to fund the loan to the ESOP to enable the ESOP to
subscribe for up to 8% of the Common Stock issued in the Offering, although a
third party lender may be utilized to lend funds to the ESOP. In the future, the
Stock Company may acquire or organize other operating subsidiaries, including
other financial institutions and financial services companies. See "Use of
Proceeds." Currently, there are no agreements or understandings for an expansion
of the Stock Company's operations. Initially, the Stock Company will neither own
nor lease any property from any third party, but will instead use the premises,
equipment and furniture of the Bank. At the present time, the Stock Company does
not intend to employ any persons other than certain officers of the Bank, who
will not be separately provided cash compensation by the Stock Company. The
Stock Company may utilize support staff of the Bank from time to time, if
needed. Additional employees will be hired as appropriate to the extent the
Stock Company expands its business in the future.
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BUSINESS OF THE BANK
General
The Bank is a community-oriented stock savings bank which was
originally chartered by the Commonwealth of Massachusetts in 1871. The Bank's
principal business consists of accepting retail deposits from the general public
through its branch offices and investing those deposits, together with funds
generated from operations and borrowings, primarily in real estate mortgage
lending and various debt and equity securities. The Bank emphasizes the
origination of one-to four-family residential mortgage loans and commercial real
estate loans. The Bank also originates home equity loans, construction loans,
commercial loans, and consumer loans. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Management Strategy."
Market Area
The Bank operates five full-service banking offices in the towns of
Medway, Franklin, Medfield and Millis, all of which are located in Norfolk
County, a suburban area adjacent to the city of Boston. The Bank's deposits are
gathered from the general public primarily in these towns and surrounding
communities. The Bank's lending activities are concentrated primarily in Norfolk
County and nearby surrounding markets in the greater Boston metropolitan area.
Consistent with large metropolitan areas in general, the economy in the Bank's
market area is based on a mixture of service, manufacturing, wholesale/retail
trade, and state and local government. Maintaining operations in a large
metropolitan area serves as a benefit to the Bank in periods of economic growth,
while at the same time fosters significant competition for the financial
services provided by the Bank. Future growth opportunities for the Bank depend
in part on national economic factors, the future growth in the Bank's market
area, and the intensity of the competitive environment for financial
institutions.
Norfolk County has experienced population growth during the 1990s, with
the county showing a higher growth rate than the Commonwealth of Massachusetts
as a whole. Population growth has been supported by the outward expansion of the
greater Boston metropolitan area, with Norfolk County's proximity to Boston and
more affordable housing attracting a number of individuals wishing to maintain
jobs in greater Boston. Within Norfolk County, the town of Franklin in
particular has experienced considerable growth in recent years in population and
employment, and is one of the fastest growing towns in Massachusetts. The
increased demand for housing resulting from this growth has had a positive
impact on real estate values and on loan demand in the area in recent years.
Lending Activities
Loan Portfolio Composition. The types of loans that the Bank may
originate are subject to federal and state law and regulations. Interest rates
charged by the Bank on loans are affected primarily by the demand for such
loans, the supply of money available for lending purposes and the rates offered
by competitors. These factors are, in turn, affected by national, regional and
local economic conditions, the levels of federal government spending and
revenue, monetary policies of the Federal Reserve Board, and tax policies.
The Bank's loan portfolio consists primarily of first mortgage loans
secured by one-to-four family residential real estate and commercial real estate
located in the Bank's primary lending area. The Bank also provides financing for
construction projects, home equity and second mortgage loans and other consumer
loans, and commercial business loans.
At March 31, 1998, the Bank's gross loan portfolio totaled $72.9
million, of which $45.7 million, or 62.77%, were one- to four-family residential
mortgage loans, and $12.1 million, or 16.67%, were commercial real estate loans.
Home equity loans were $5.2 million, or 7.15% of gross loans, construction loans
were $3.9 million, or 5.30% of gross loans, and commercial business loans were
$3.5 million, or 4.84% of gross loans at March 31, 1998.
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Loan Portfolio Composition. The following information relates to the
composition of the Bank's loan portfolio in dollar amounts and in percentages
(before deductions for unadvanced construction loans, deferred fees, and
premiums and discounts and allowances for loan losses) as of the dates
indicated.
<TABLE>
<CAPTION>
June 30,
March 31, -----------------------------------------------
1998 1997 1996
---------------------- ---------------------- ---------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
Real estate loans:
<S> <C> <C> <C> <C> <C> <C>
One- to four-family.............. $ 45,732 62.77% $ 47,196 69.91% $ 42,774 70.98%
Commercial....................... 12,148 16.67 8,342 12.36 5,860 9.72
Construction..................... 3,862 5.30 2,880 4.27 3,154 5.23
----------- -------- ----------- ------- ----------- -------
Total real estate loans...... 61,742 84.74 58,418 86.54 51,788 85.93
----------- -------- ----------- ------- ----------- -------
Other loans:
Consumer loans:
Collateral.................... 886 1.22 596 0.88 386 0.64
Home equity................... 5,209 7.15 4,574 6.78 4,271 7.09
Other......................... 1,495 2.05 1,362 2.02 1,128 1.87
----------- -------- ----------- ------- ----------- -------
Total consumer loans......... 7,590 10.42 6,532 9.68 5,785 9.60
Commercial business loans........ 3,525 4.84 2,554 3.78 2,695 4.47
----------- -------- ----------- ------- ----------- -------
Total other loans............ 11,115 15.26 9,086 13.46 8,480 14.07
----------- -------- ----------- ------- ----------- -------
Total gross loans............ 72,857 100.00% 67,504 100.00% 60,268 100.00%
======== ======= =======
Less:
Net deferred loan fees........ (103) (99) (100)
Deferred (income) premium..... 3 4 (31)
Allowance for loan losses..... (560) (475) (470)
----------- ----------- -----------
Total loans receivable, net $ 72,197 $66,934 $59,667
========== =========== ===========
</TABLE>
Loan Originations. Substantially all of the Bank's loan origination
activity is conducted by the Bank's loan personnel at its main office and, to a
lesser extent, at the Bank's other retail office locations. The Bank relies on
referrals from existing customers, attorneys and other real estate professionals
to generate business within its lending area. In addition, existing borrowers
are an important source of business since many of its commercial real estate and
commercial business loan customers have more than one loan outstanding with the
Bank. Construction loans are obtained primarily from builders who have an
established relationship with the Bank. Consumer loans are largely generated
through existing customers and walk-in customers. Loan generation is further
supported by advertising and community service by Bank employees.
The Bank's ability to originate loans depends on the strength of the
economy, trends in interest rates, customer demands and competition. See "Risk
Factors--Increased Lending Risks Associated with Commercial Real Estate Mortgage
Lending."
Loan Sales and Servicing. While the Bank has not originated for sale
large commercial real estate and commercial business loans, the Bank may
originate such loans for sale in the future to accommodate customers seeking
larger loans without taking on credit risks beyond policy guidelines.
The Bank's general practice has been to retain all one- to four-family
adjustable- rate residential mortgage loans and to sell one- to four-family
fixed-rate mortgage loans on a servicing-released basis. However, due to the
current limited demand for ARM loans and the potential for portfolio shrinkage
resulting from refinanced loans, the Bank's current policy is to retain in
portfolio 15-year fixed-rate one- to four-family residential mortgage loans
originated at interest rates of 7% or higher. To facilitate the sale of
fixed-rate one- to four-family residential mortgage loans, such loans are
generally underwritten to conform to secondary market guidelines. The Bank does
not service loans originated by other financial institutions.
65
<PAGE>
Loan Purchases. To supplement originations of one- to four-family
residential mortgage loans, the Bank purchases adjustable-rate one-to-four
family mortgage loans secured by residential properties in the New England area
originated by other New England-based financial institutions. All purchased
loans are priced at market rates and must meet the underwriting standards
applied to loans originated by the Bank. Such loan purchases totaled $2.5
million for the nine months ended March 31, 1998 and $2.7 million and $2.8
million for the twelve months ended June 30, 1997 and 1996, respectively.
Historically, the Bank has purchased only whole loans and has not purchased
participations in loans originated by others.
The following table sets forth the Bank's loan originations, purchases,
sales and principal repayments for the periods indicated.
Nine Months
Ended March 31, Years Ended June 30,
--------------- ---------------------
1998 1997 1997 1996
---- ---- ---- ----
(In Thousands)
Originations:
Real estate:
One- to four-family ............. $10,175 $ 6,319 $ 8,701 $10,260
Commercial ...................... 3,296 1,655 4,132 1,611
Construction .................... 2,837 3,732 4,227 3,352
Non-real estate:
Consumer ........................ 2,816 2,932 4,057 3,095
Commercial business ............. 2,314 1,395 2,658 1,729
------- ------- ------- -------
Total loans originated ............ 21,438 16,033 23,775 20,047
------- ------- ------- -------
Purchases:
Real estate:
One- to four-family ............. 2,490 2,670 2,670 2,826
Non-real estate:
Commercial business ............. -- -- -- 500(1)
------- ------- ------- -------
Total loans purchased ............. 2,490 2,670 2,670 3,326
------- ------- ------- -------
Sales and Repayments:
Real estate:
One- to four-family ............. 5,379 1,585 2,219 361
------- ------- ------- -------
Principal repayments .............. 13,196 12,671 16,990 11,109
------- ------- ------- -------
Total reductions .................. 18,575 14,256 19,209 11,470
------- ------- ------- -------
Net increase - gross loans ........ $ 5,353 $ 4,447 $ 7,236 $11,903
======= ======= ======= =======
- ------------
(1) Consists of loans secured by leases on residential property.
66
<PAGE>
Loan Maturity and Repricing. The following table sets forth certain
information as of March 31, 1998, regarding the dollar amount of loans maturing
in the Bank's portfolio based on their contractual terms to maturity. Demand
loans having no stated schedule of repayments and no stated maturity, and
overdrafts are reported as due in one year or less. Adjustable and floating rate
loans are included in the period in which interest rates are next scheduled to
adjust rather than the period in which they contractually mature, and fixed-rate
loans are included in the period in which the final contractual repayment is
due. This table does not include prepayments on scheduled principal
amortizations.
<TABLE>
<CAPTION>
One Three Five Ten
Within Through Through Through Through Beyond
One Three Five Ten Twenty Twenty
Year Years Years Years Years Years Total
---- ----- ----- ----- ----- ----- -----
(In Thousands)
Real estate loans:
<S> <C> <C> <C> <C> <C> <C> <C>
One- to four-family.............. $18,405 $10,404 $6,545 $2,789 $3,285 $4,305 $45,732
Commercial....................... 4,461 5,576 1,444 149 518 -- 12,148
Construction..................... 2,657 565 476 39 126 -- 3,862
------ ------ ------ ------ ------ ------ ------
Total real estate loans........ 25,523 16,544 8,464 2,977 3,929 4,305 61,742
Other loans
Consumer......................... 6,442 756 227 165 -- -- 7,589
Commercial business.............. 2,729 730 59 7 -- -- 3,525
------ ------ ------ ------ ------ ------ ------
Total loans.................... $34,694 $18,029 $8,750 $3,149 $3,929 $4,305 72,857
======= ======= ====== ====== ====== ====== ======
Less:
Deferred loan origination fees (103)
Deferred premiums................ 3
Allowance for loan losses........ (560)
-------
Net loans.................... $72,197
=======
</TABLE>
Prepayments and scheduled principal amortization totaled $13.2 million
for the nine months ended March 31, 1998 and $17.0 million and $11.1 million for
the years ended June 30, 1997 and 1996, respectively.
The following table sets forth at March 31, 1998, the dollar amount of
gross loans, net of unadvanced funds on loans, contractually due or scheduled to
reprice after March 31, 1999, and whether such loans have fixed interest rates
or adjustable interest rates. This table does not include prepayments on
scheduled principal amortizations.
Due After March 31, 1999
--------------------------------
Fixed Adjustable Total
----- ---------- -----
(In Thousands)
Real estate loans:
One- to four-family ................... $12,667 $14,660 $27,328
Commercial ............................ -- 7,686 7,686
Construction .......................... -- 1,206 1,206
------- ------- -------
Total real estate loans ............. 12,667 23,553 36,220
Other loans:
Consumer loans ........................ 1,139 8 1,147
Commercial business loans ............. 557 239 796
------- ------- -------
Total loans receivable .............. $14,363 $23,800 $38,163
======= ======= =======
The Bank originates commercial real estate loans both as fixed-rate
loans and adjustable-rate loans. Typical terms for adjustable-rate commercial
real estate loans provide for a 3-year repricing term with a 20-year
amortization. Fixed-rate commercial real estate loans generally are amortized
for up to 30 years. See "--Commercial Real Estate Lending." Depending on the
size of the loan and the term for which it is fixed, the Bank may borrow from
the FHLB
67
<PAGE>
for a term that matches the fixed interest rate period in an amount equal to all
or part of the loan at the time of origination.
One-to Four-Family Mortgage Lending. The Bank currently offers both
fixed-rate and adjustable-rate mortgage loans secured by one-to four-family
residences located in the Bank's primary lending area, with maturities ranging
from fifteen to thirty years. One-to four-family mortgage loan originations are
generally obtained by the Bank through relationships established with real
estate brokers within the Bank's market area and by personnel at the Bank's five
operating offices. Currently, the Bank originates fixed-rate one- to four-family
mortgage loans for sale in the secondary mortgage market, except for 15-year
fixed-rate mortgage loans originated at an interest rate of 7% or higher.
Fixed-rate loans sold by the Bank are generally sold on a servicing released
basis. At March 31, 1998, the Bank's one-to-four family mortgage loans totaled
$45.7 million, or 62.77% of gross loans.
The Bank currently offers the following adjustable-rate mortgage loan
programs: a one year adjustable-rate loan that reprices annually, a three year
adjustable-rate loan that reprices every third year and a "5-1" loan (for first-
time home buyers) where the interest rate is fixed for the first five years and
is adjusted on an annual basis thereafter. The interest rates on the
adjustable-rate loans are indexed to the comparable-term U.S. Treasury
securities rate, with the initial rate of interest being dependent upon the
length of the repricing term (i.e., a higher rate is charged for loans with an
initial three-year repricing term). Initial rates on ARM loans are typically
discounted from the fully-indexed rate. The one year adjustable-rate loan and
the 5-1 adjustable-rate loans are subject to interest rate caps of 2% for each
adjustment period up to a maximum of 6% over the life of the loan. The three
year adjustable-rate loan is subject to a 3% cap for each adjustment period up
to a maximum of 6% over the life of the loan. As of March 31, 1998, the interest
rates offered by the Bank on the three types of adjustable-rate loans ranged
from 0.875 basis points to 1.375 basis points above the Index rates.
The volume and type of adjustable-rate loans originated by the Bank are
affected by market factors such as interest rates, consumer preferences and the
availability of funds. While the origination of adjustable-rate loans helps
reduce the Bank's exposure to increases in interest rates, credit risk can
increase if borrowers are unable to make the larger payments that result from
upward interest rate adjustments. Periodic and lifetime caps on interest rate
increases help to reduce the risks associated with adjustable-rate loans but
also limit the Bank's sensitivity to interest rate risk.
One-to four-family residential mortgage loans are generally
underwritten in accordance with FNMA and FHLMC guidelines, with some exceptions
on adjustable-rate loans originated for retention in the Bank's loan portfolio.
Loans are originated in amounts up to 95% of the lower of the appraised value or
the selling price of the property securing the loan. The Bank requires private
mortgage insurance to be obtained for loans in excess of an 80% loan-to-value
ratio.
Commercial Real Estate Mortgage Lending. Origination of loans secured
by commercial real estate is the Bank's most significant area of lending
activity after one- to four-family residential mortgage lending. The loans are
generally secured by office buildings, office warehouses, apartments and gas
stations located in the Bank's primary market area. At March 31, 1998,
commercial real estate mortgage loans totaled $12.1 million, or 16.67% of gross
loans, an increase of $6.3 million, or 107.3%, since June 30, 1996.
Pursuant to the Bank's underwriting policies, a number of factors are
considered before a commercial real estate loan is made. The qualifications and
financial condition of the borrower, including credit history, profitability and
expertise, as well as the value and condition of the underlying property, are
evaluated. When evaluating the qualifications of the borrower for a multi-family
mortgage loan, the Bank considers the financial resources of the borrower, the
borrower's experience in owning or managing similar property and the borrower's
payment history with the Bank and other financial institutions. Factors
considered in evaluating the underlying property include the net operating
income of the mortgaged premises before debt service and depreciation, the debt
service coverage ratio (the ratio of net operating income to debt service) and
the ratio of the loan amount to the appraised value.
68
<PAGE>
According to Bank policy, multi-family mortgage loans may be made in an
amount up to 80% of the lower of the appraised value (as determined by the Bank
or a qualified independent appraiser, whichever is lower) or the sales price of
the underlying property, provided the debt service coverage ratio is not less
than 125%. The appraisal process takes into consideration geographic location,
comparable sales, vacancy rates, if applicable, operating expenses and historic,
current and projected economic conditions. Appraisals are obtained from
independent licensed and certified fee appraisers for all loan requests.
Commercial real estate loans are offered both as adjustable-rate and
fixed-rate loans. Typical terms for adjustable-rate loans provide for a
three-year repricing term, with a 20-year amortization. Fixed-rate commercial
real estate loans are amortized for up to 30 years. The adjustable-rate is
generally tied to the Prime Rate as published in the Wall Street Journal. The
Bank from time to time will partially fund fixed-rate loans through fixed-rate
borrowings from the FHLB of Boston obtained for periods that approximate the
fixed-rate terms of the loans originated.
Many of the Bank's commercial real estate borrowers have done business
with the Bank for many years and have more than one loan outstanding. The Bank
generally originates commercial real estate loans of $150,000 to $500,000, a
range the Bank views as being too small for larger commercial banks. At March
31, 1998, the largest commercial real estate borrower had aggregate loans
outstanding of $748,000, or 7.9% of core capital. Including this borrower, there
were four borrowers each with aggregate commercial loans outstanding at March
31, 1998 of $500,000 or more, the cumulative total of which was $2.5 million, or
3.4% of gross loans. At March 31, 1998, all of these loans were performing in
accordance with their contractual terms.
Loans secured by commercial real estate generally involve larger
principal amounts and a greater degree of risk than one-to-four family
residential mortgage loans. Because payments of loans secured by commercial real
estate are often dependent on successful operation or management of the
properties, repayment of such loans may be subject to a greater extent to
adverse conditions in the real estate market or the economy. See "Risk
Factors--Lending Risks Associated with Commercial Real Estate Mortgage Lending."
The Bank intends to emphasize its commercial real estate lending
activities in its primary lending area depending on the demand for such loans
and trends in the real estate market and the economy. In anticipation of the
growth of this portion of the loan portfolio, the Bank has recently hired an
experienced banker with more than 18 years of corporate credit analysis and
lending experience to lend its commercial loan department.
Construction Lending. The Bank provides funding for construction
projects involving residential properties within its primary lending area. These
loans may be for the construction of new properties or the rehabilitation of
existing properties. Most of the Bank's construction lending activities consist
of construction loans on pre-sold property. The Bank underwrites
construction-permanent loans for one- to four-family property according to its
own internal guidelines for adjustable-rate mortgages. For this type of
construction loan, the Bank will lend up to 90% of the lesser of appraised value
upon completion of construction or the cost of construction, provided private
mortgage insurance coverage is obtained for any loan with a loan-to-value or
loan-to-cost ratio in excess of 80%. For loans on one-to-four family properties
being constructed for sale, the Bank lends up to 80% of the lesser of completed
value or project cost (and up to 70% for speculative loans). Typically, loan
proceeds are disbursed in increments as construction progresses as determined by
property inspections.
At March 31, 1998, total construction loans outstanding amounted to
$3.9 million, or 5.30% of gross loans, and the Bank had committed to fund
additional construction loans totaling $1.5 million.
Construction financing is generally considered to involve a higher
degree of risk than long-term financing on improved, occupied real estate. Risk
of loss on a construction loan is largely dependent upon the accuracy of the
initial estimate of construction costs, the estimated time to sell or rent the
completed property at an adequate price or rate of occupancy, and market
conditions. If the estimates and projections prove to be inaccurate, the Bank
may be confronted with a project which, upon completion, has a value that is
insufficient to assure full loan repayment.
69
<PAGE>
Home Equity Lending. The Bank offers home equity lines of credit and
fixed-term loans secured by one-to-four family owner-occupied properties in its
primary lending area. Loans are offered in amounts up 80% of the value of the
property, less the first lien. Values are determined by a recent tax bill from
the town where the property is located showing the assessed value of the
property. Fixed-term home equity loans are written at fixed rates, and are
amortized for terms of up to 10 years, while home equity lines of credit are
written with adjustable rates, and may be extended for up to 15 years (with a 5
year draw period and a 10 year repayment period). At March 31, 1998, the Bank
had $5.2 million in home equity loans, or 7.15% of gross loans.
Commercial Loans. The Bank originates both secured and unsecured
commercial business loan to businesses located in the Bank's primary lending
area. Commercial business loans are originated as both fixed-rate loans and
adjustable-rate loans set at a percentage above the Prime Rate as published in
the Wall Street Journal. Fixed-rate loans generally are originated for terms of
seven years or less. The Bank intends for commercial business lending (and,
specifically, the Bank's new "Business One" loan product, which is a line of
credit available for commercial loan customers seeking a transaction account
with the Bank) to be an area of growth for the Bank. At March 31, 1998,
commercial business loans totaled $3.5 million, or 4.84% of gross loans.
Consumer Loans. The Bank's origination of consumer loans, other than
home equity loans, has been fairly limited. This consumer loan portfolio
includes direct automobile loans and various other types of installment loans,
including loans secured by deposits, as well as a modest amount of revolving
credit balances. Consumer lending is expected to remain a limited part of the
Bank's overall lending program. At March 31, 1998, consumer loans other than
home equity loans totaled $2.4 million, or 3.27% of gross loans.
Loan Approval Procedures and Authority. The Board of Directors annually
approves the lending policies and loan approval limits for the Bank as well as
the independent appraisers used by the Bank. Loans may be approved by loan
officers, management, the Loan Committee or the Board of Directors, depending on
the type and size of the loan and the borrower's aggregate loan balances with
the Bank. Where the borrower's aggregate loan balances with the Bank are
$250,000 or less, individual loan officers may approve loans, and where the
borrower's aggregate loan balances with the Bank are between $250,000 and
$500,000, the loan request must be approved by the Loan Committee. The Loan
Committee is made up of the President, Senior Loan Officer, Vice President of
Commercial Lending and the head of the loan servicing department. Where the
borrower's aggregate borrowings with the Bank exceed $500,000, the loan request
must be approved by the Board of Directors.
The Bank requires an environmental site assessment to be performed by
an independent professional for all non-residential mortgage loans. It is also
the Bank's policy to require title and hazard insurance on all mortgage loans.
In addition, the Bank may require borrowers to make payments to a mortgage
escrow account for the payment of property taxes. Any exceptions to the Bank's
loan policies must be made in accordance with the limitations set out in each
policy. Typically, the exception authority ranges from the Senior Loan Officer
to the Board of Directors, depending on the size and type of loan involved.
Environmental Issues
The Bank encounters certain environmental risks in its lending
activities. Under federal and state environmental laws, lenders may become
liable for costs of cleaning up hazardous materials found on property securing
their loans. In addition, the existence of hazardous materials may make it
unattractive for a lender to foreclose on such properties. Although
environmental risks are usually associated with loans secured by commercial real
estate, risks also may be substantial for loans secured by residential real
estate if environmental contamination makes the property unsuitable for use.
This could also have a negative effect on nearby property values. The Bank
attempts to control its risk by requiring completion of a phase one
environmental assessment as part of its underwriting of all non-residential real
estate mortgage loans.
70
<PAGE>
The Bank believes its procedures regarding the assessment of
environmental risk are adequate and, as of March 31, 1998, the Bank was unaware
of any environmental issues which would subject it to any material liability.
However, no assurance can be given that the values of properties securing loans
in the Bank's portfolio will not be adversely affected by unforeseen
environmental risks.
Delinquent Loans, Other Real Estate Owned and Classified Assets
Delinquent Loans. The Senior Loan Officer reviews the status of all
delinquent loan on a weekly basis. The actions taken by the Bank with respect to
delinquencies vary depending upon the nature of the loan and the period of
delinquency. Notices are generated by the Bank's service bureau when a loan is
five and twelve days past due. In addition, once a loan becomes fifteen days
past due, the borrower is contacted by phone in an attempt to bring the loan up
to date. Collection letters are used in addition to and as a supplement to
telephone calls. Typically, collection letters are sent out when a loan becomes
fifteen days overdue, and again at thirty days. Where allowed, late charges are
assessed once a loan becomes past due the required number of days.
On loans secured by one- to four-family residences, the Bank attempts
to work out a payment schedule with the borrower in order to avoid foreclosure.
If a satisfactory payment plan is not arranged, the Bank refers the loan to
legal counsel and foreclosure procedures are initiated after the 90th day of
delinquency. At any time prior to a sale of the property at foreclosure,
foreclosure proceedings will be terminated if the borrower and the Bank are able
to work out a satisfactory payment plan. On loans secured by commercial real
estate properties, the Bank also seeks to reach a satisfactory payment plan so
as to avoid foreclosure. If a satisfactory pay plan is not arranged, the Bank
refers the loan to legal counsel for foreclosure after the loan becomes ninety
days past due. Prior to any foreclosure, the Bank requires an updated appraisal
of the property.
Other Real Estate Owned. Property acquired through foreclosure or
acceptance of a deed in lieu of foreclosure are classified in the Bank's
financial statements as other real estate owned ("OREO"). When a property is
placed in OREO, the excess of the loan balance over the estimated fair value is
charged to the allowance for loan losses. Estimated fair value usually
represents the sales price a buyer would be willing to pay on the basis of
current market conditions, including normal loan terms from other financial
institutions, less estimated costs to sell the property. Management inspects all
OREO properties periodically. When a decline in estimated fair value of a
property is deemed to have taken place, management establishes an allowance for
such decline by a charge to income. The adequacy of the allowance for OREO is
evaluated by management and reviewed with the Loan Committee on a quarterly
basis, taking into consideration each property in the portfolio and current real
estate market conditions. At March 31, 1998, the Bank had no OREO.
Classified Assets. Consistent with regulatory guidelines, the Bank
provides for the classification of loans and other assets considered to be of
lesser quality. Such ratings coincide with the "Substandard", "Doubtful" and
"Loss" classifications used by federal regulators in their examination of
financial institutions. Generally, an asset is considered Substandard if it is
inadequately protected by the current net worth and paying capacity of the
obligors and/or the collateral pledged. Substandard assets include those
characterized by the distinct possibility that the insured financial institution
will sustain some loss if the deficiencies are not corrected. Assets classified
as Doubtful have all the weaknesses inherent in assets classified Substandard
with the added characteristic that the weaknesses present make collection or
liquidation in full, on the basis of currently existing facts, highly
questionable and improbable. Assets classified as Loss are those considered
uncollectible and of such little value that their continuance as assets without
the establishment of a specific loss reserve and/or charge-off is not warranted.
Assets which do not currently expose the insured financial institution to
sufficient risk to warrant classification in one of the aforementioned
categories but otherwise possess weaknesses are designated "Special Mention."
When the Bank classifies problem assets as either Substandard or
Doubtful, it establishes general valuation allowances or "loss reserves" in an
amount deemed prudent by management. General allowances represent loss
allowances that have been established to recognize the inherent risk associated
with lending activities, but which,
71
<PAGE>
unlike specific allowances, have not been allocated to particular problem
assets. When the Bank classifies problem assets as "Loss," it is required either
to establish a specific allowance for losses equal to 100% of the amount of
assets so classified, or to charge-off such amount. The Bank's determination as
to the classification of its assets and the amount of its valuation allowance is
subject to review by its regulatory agencies, which can order the establishment
of additional general or specific loss allowances. The Bank reviews its
portfolio monthly to determine whether any assets require classification in
accordance with applicable regulations.
On the basis of management's review of its assets, at March 31, 1998,
the Bank had classified a total of $688,000 of its loans and other assets as
follows:
March 31, 1998
--------------
(In Thousands)
Special Mention............................. $ --
Substandard................................. 661
Doubtful assets............................. 27
Loss assets................................. --
---------
Total.................................. $ 688
=========
General allowance........................... $ 434
=========
Specific allowance.......................... $ 126
=========
Charge-offs................................. $ --
=========
The FDIC, in conjunction with the other federal banking agencies, has
adopted an interagency policy statement on allowances for loan and lease losses.
The policy statement provides guidance for financial institutions on both the
responsibilities of management for the assessment and establishment of adequate
allowances and guidance for banking agency examiners to use in determining the
adequacy of a financial institution's valuation methodology. Generally, the
policy statement recommends that financial institutions have effective systems
and controls to identify, monitor and address asset quality problems; that
management analyze all significant factors that affect the collectibility of the
portfolio in a reasonable manner; and that management establish acceptable
valuation processes that meet the objectives set forth in the policy statement.
While the Bank believes that it has established adequate allowances for losses
on loans and OREO, there can be no assurance that the regulators, in reviewing
the Bank's loan portfolio and OREO, will not request the Bank to materially
increase at that time its allowances for losses, thereby negatively affecting
the Bank's financial condition and earnings at that time. Although management
believes that adequate specific and general loss allowances have been
established, actual losses are dependent upon future events and, as such,
further additions to the level of specific and general loss allowances may
become necessary.
72
<PAGE>
Non-Accrual Loans and Non-Performing Assets. The table below sets forth
the amounts and categories of non-performing assets in the Bank's loan
portfolio. Loans are placed on non-accrual status when the collection of
principal and/or interest become doubtful. For all years presented, the Bank has
had no troubled debt restructurings (which involve forgiving a portion of
interest or principal on any loans or making loans at a rate materially less
than that of market rates). Foreclosed assets include assets acquired in
settlement of loans.
<TABLE>
<CAPTION>
June 30,
March 31, ------------------------------
1998 1997 1996
------------- ------------- -------------
(Dollars in Thousands)
Non-accruing loans:
<S> <C> <C> <C>
One- to four-family real estate....... $ 315 $ 193 $ 424
Commercial real estate -- -- --
Construction ......................... -- -- --
Consumer.............................. -- -- 25
Commercial business................... 28 -- 449
------------- ------------- -------------
Total............................... 343 193 898
------------- ------------- -------------
Accruing loans delinquent more than 90 days:
One- to four-family real estate....... 172 334 29
Commercial real estate -- -- --
Construction ......................... -- -- --
Consumer.............................. 5 -- 17
Commercial business................... 146 2 --
------------- ------------- -------------
Total............................... 323 336 46
------------- ------------- -------------
Foreclosed assets:
One- to four-family real estate....... -- -- --
Commercial real estate -- -- --
Construction ......................... -- 37 --
Consumer.............................. -- -- --
Commercial business................... -- -- --
------------- ------------- -------------
Total............................... -- 37 --
------------- ------------- -------------
Total non-performing assets and
delinquent loans...................... $ 666 $ 566 $ 944
============= ============= =============
Total as a percentage of total assets... 0.51% 0.54% 1.04%
============= ============= =============
</TABLE>
For the year ended June 30, 1997 and for the nine months ended March
31, 1998, gross interest income which would have been recorded had non-accruing
loans been current in accordance with their original terms amounted to $15,000
and $26,000, respectively. The amounts that were included in interest income on
such loans were $9,000 and $10,000 for the year ended June 30, 1997, and for the
nine months ended March 31, 1998, respectively.
73
<PAGE>
The following table sets forth delinquencies in the Bank's loan
portfolio as of the dates indicated:
<TABLE>
<CAPTION>
March 31, 1998 June 30, 1997
----------------------------------------- --------------------------
60-89 Days 90 Days or More 60-89 Days 90 Days or More
------------------- ----------------- ------------------- -----------------
Principal Principal Principal Principal
Number Balance Number Balance Number Balance Number Balance
of Loans of Loans of Loans of Loans of Loans of Loans of Loans of Loans
-------- -------- -------- -------- -------- -------- -------- --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family real estate 5 $ 522 4 $ 403 3 $ 431 5 $ 443
Commercial real estate......... 1 50 1 137 1 138 -- --
Construction................... -- -- -- -- -- -- -- --
Consumer loans................. 2 14 1 5 5 28 -- --
Commercial business............ 2 6 2 37 -- -- 1 2
----- ------ ------ ------ ------ ------ ------ ------
Total....................... 10 $ 592 8 $ 582 9 $ 597 6 $ 445
===== ====== ====== ====== ====== ====== ====== ======
Delinquent loans to total loans 0.81% 0.80% 0.89% 0.66%
====== ====== ====== ======
</TABLE>
June 30, 1996
--------------------------------------------
60-89 Days 90 Days or More
------------------- --------------------
Principal Principal
Number Balance Number Balance
of Loans of Loans of Loans of Loans
-------- -------- -------- --------
One- to four-family real estate 4 $ 319 3 $ 287
Commercial real estate......... -- -- 1 449
Construction................... 1 37 -- --
Consumer loans................. 11 60 5 42
Commercial business............ 1 5 -- --
----- ------ ------ ------
Total....................... 17 $ 421 9 $ 778
===== ====== ====== ======
Delinquent loans to total loans 0.70% 1.29%
====== ======
74
<PAGE>
Allowance for Loan Losses
The allowance for loan losses is established through provisions for
loan losses based on management's on-going evaluation of the risks inherent in
the Bank's loan portfolio. Factors considered in the evaluation process include
growth of the loan portfolio, the risk characteristics of the types of loans in
the portfolio, geographic and large borrower concentrations, current regional
economic and real estate market conditions that could affect the ability of
borrowers to pay, the value of underlying collateral, and trends in loan
delinquencies and charge-offs. The allowance for loan losses is maintained at an
amount management considers adequate to cover estimated losses in its loan
portfolio which are deemed probable and estimable based on information currently
known to management. See "-- Delinquent Loans, Other Real Estate Owned and
Classified Assets--Classified Assets."
The following table sets forth activity in the Bank's allowance for
loan losses for the periods set forth in the table.
Nine Months
Ended March 31, Years Ended June 30,
---------------- --------------------
1998 1997 1997 1996
---- ---- ---- ----
(Dollars in Thousands)
Balance at beginning of period ....... $ 475 $ 470 $ 470 $ 445
Charge-offs:
One- to four-family ................ -- -- -- --
Commercial real estate ............. -- -- -- --
Construction ....................... -- -- -- --
Consumer ........................... 11 20 20 --
Commercial business ................ -- -- 74 88
----- ----- ----- -----
11 20 94 88
----- ----- ----- -----
Recoveries:
One- to four-family ................ -- 20 20 --
Commercial real estate ............. -- -- -- --
Construction ....................... -- -- -- --
Consumer ........................... 6 7 8 17
Commercial business ................ 15 27 36 3
----- ----- ----- -----
21 54 64 20
----- ----- ----- -----
Net charge-offs (recoveries) ......... (10) (34) 30 68
Additions charged to earnings ........ 75 35 35 93
----- ----- ----- -----
Balance at end of period ............. $ 560 $ 539 $ 475 $ 470
===== ===== ===== =====
Ratio of net charge-offs
(recoveries)during the
period to average loans
outstanding during the period ...... (0.01)% (0.05)% 0.05% 0.13%
===== ===== ===== =====
Ratio of net charge-offs
(recoveries) during the
period to average non-
performing assets .................. (3.62)% (4.97)% 5.35% 7.01%
===== ===== ===== =====
75
<PAGE>
The distribution of the Bank's allowance for losses on loans at the
dates indicated is summarized as follows:
<TABLE>
<CAPTION>
June 30,
--------------------------------------------------------------
March 31, 1998 1997 1996
-------------------------- --------------------------- ------------------------------
Percent Percent Percent
of Loans of Loans of Loans
Loan in Each Loan in Each Loan in Each
Amount of Amounts Category Amount of Amounts Category Amount of Amounts Category
Loan Loss by to Total Loan Loss by to Total Loan Loss by to Total
Allowance Category Loans Allowance Category Loans Allowance Category Loans
--------- -------- ----- --------- -------- ----- --------- -------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family
real estate ............... $ 206 $45,732 62.77% $ 199 $47,196 69.91% $ 267 $42,774 70.98%
Commercial real estate ..... 158 12,148 16.67 117 8,342 12.36 100 5,860 9.72
Construction ............... 12 3,862 5.30 7 2,880 4.27 8 3,154 5.23
Home equity ................ 12 5,209 7.15 11 4,574 6.78 11 4,271 7.09
Consumer ................... 7 2,381 3.27 7 1,958 2.90 6 1,514 2.51
Commercial business ........ 67 3,525 4.84 28 2,554 3.78 63 2,695 4.47
Unallocated ................ 98 -- -- 106 -- -- 15 -- --
------- ------- ------ ----- ------- ------ ----- ------- ------
Total ................. $ 560 $72,857 100.00% $ 475 $67,504 100.00% $ 470 $60,268 100.00%
======= ======= ====== ===== ======= ====== ===== ======= ======
</TABLE>
Investment Activities
The investment policy of the Bank is reviewed and approved by the Board
of Directors on an annual basis. The Bank views its investment portfolio as an
alternative earning asset vehicle into which to deploy excess funds as well as
to assist in interest-rate risk management. Compliance with the Bank's
investment policy is the responsibility of the President. Investment purchases
are initiated in accordance with specific guidelines and criteria specified in
the investment policy. No sales of investment securities can be made without the
prior permission of the President. All investment transactions are reported to
and reviewed by the Board of Directors on a monthly basis.
The Bank's current policy generally favors investment in U.S.
Government and Agency securities, corporate debt obligations and corporate
equities. The policy permits investment in mortgage-backed and mortgage-related
securities but does not allow the use of interest rate swaps, options and
futures. The Bank's current investment strategy has emphasized the purchase of
U.S. Government and Agency obligations and corporate debt obligations generally
maturing within ten years.
At March 31, 1998, the Bank had $44.9 million, or 34.2% of total
assets, in securities consisting primarily of U.S. Government and Agency
obligations ($29.6 million), corporate obligations ($2.5 million), certificates
of deposit ($1.5 million) and marketable equity securities ($3.3 million).
Investment in mortgage-backed securities totaled $7.3 million at that date. Also
included in investments is $723,000 of FHLB stock. To avail itself of services
offered by that organization, in particular the ability to borrow funds, the
Bank is required to invest in the stock of the FHLB in an amount determined on
the basis of the Bank's residential mortgage loans and borrowings from the FHLB.
The stock is redeemable at par and earns dividends declared at the discretion of
the FHLB.
SFAS No. 115 requires the Bank to designate its securities as held to
maturity, available for sale or trading depending on the Bank's intent regarding
its investments. The Bank does not currently maintain a trading portfolio of
securities. At March 31, 1998, all of the Bank's securities, except for
certificates of deposit and FHLB stock were designated as available for sale.
The net unrealized gain on securities classified as available for sale was
$677,000 at March 31, 1998.
U.S. Government and Agency Obligations. At March 31, 1998, the Bank's
U.S. Government and Agency securities portfolio totaled $29.6 million, all of
which was classified as available for sale. This portfolio consists primarily of
medium-term (maturities of 5 to 10 years) securities. The Bank's current
investment strategy, however, is to maintain investments in such instruments for
liquidity purposes, as collateral for borrowings, and for prepayment
76
<PAGE>
protection. The Bank's Agency debentures are callable on a semi-annual basis
following a holding period of twelve months. The Bank generally does not
purchase structured notes and there were no structured notes in the Bank's
portfolio at March 31, 1998.
Corporate Obligations and Certificates of Deposit. At March 31, 1998,
the Bank's portfolio of corporate debt obligations and certificates of deposit
totaled $2.5 million and $1.5 million, respectively. The Bank's policy generally
requires that investment in corporate debt obligations be limited to corporate
bonds with an "A" rating or better by at least one nationally recognized rating
service at the time of purchase.
Marketable Equity Securities. At March 31, 1998, the Bank's marketable
equity securities portfolio totaled $3.3 million, all of which was in common
stocks. Since June 30, 1996, the Bank's marketable equity securities portfolio
has ranged from $2.6 million to $3.3 million. While the Bank has no policy
limiting the aggregate carrying value of marketable equity securities,
applicable regulations limit the aggregate carrying value of such securities to
100% of the Bank's retained earnings. However, management has no present
intention of increasing the size of this portfolio. The Bank purchases
marketable equity securities as growth investments that can provide the
opportunity for capital appreciation that is taxed on a more favorable basis
than operating income. There can be no assurance that investment in marketable
equity securities will achieve appreciation in value and, therefore, such
investments involve higher risk. Aggregate purchases of marketable equity
securities totaled $1.8 million for the nine months ended March 31, 1998 and
$3.0 million and $2.6 million for the twelve months ended June 30, 1997 and
1996, respectively. At March 31, 1998, pre-tax net unrealized gains on common
stocks amounted to $550,000. See "Regulation--Activities and Investments of
Insured State-Chartered Banks."
Mortgage-Backed Securities. At March 31, 1998, the Bank's
mortgage-backed securities totaled $7.3 million, all of which were classified as
available for sale. Mortgage-backed securities are generally purchased by the
Bank as a means to deploy excess liquidity at more favorable yields than other
investment alternatives. In addition, mortgage-backed securities generate
positive interest rate spreads with minimal administrative expense and lower the
Bank's overall credit risk due to the guarantees on such securities provided by
GNMA, FNMA and FHLMC. The Bank generally does not invest in collateralized
mortgage obligations and the Bank's portfolio of mortgage-backed securities
included no collateralized mortgage obligations at March 31, 1998. At March 31,
1998, the Bank's mortgage-backed securities portfolio had a weighted average
yield of 5.90%.
Mortgage-backed securities are created by pooling individual mortgages
and bear an interest rate that is less than the interest rate on the underlying
mortgages. Mortgage-backed securities typically represent a participation
interest in a pool of single family or multi-family mortgages, although the Bank
generally purchases only mortgage-backed securities backed by single family
mortgage loans. The issuers of such securities (generally U.S. Government
agencies and Government sponsored enterprises, including FNMA, FHLMC and GNMA)
pool and resell the participation interests in the form of securities to
investors and guarantee the payment of principal and interest to these
investors. Investments in mortgage-backed securities involve a risk that actual
prepayments on the underlying mortgage loans will be greater than estimated over
the life of the security, which may require adjustments to the amortization of
any premium or accretion of any discount relating to such instruments, thereby
affecting the net yield on such securities. There is also reinvestment risk
associated with the cash flows from such securities or in the event such
securities are redeemed by the issuer. Finally, the market value of such
securities may be adversely affected by changes in interest rates.
77
<PAGE>
The following table sets forth the composition of the Bank's investment
securities at the dates indicated.
<TABLE>
<CAPTION>
June 30,
March 31, ---------------------------------------------
1998 1997 1996
---------------------- --------------------- ----------------------
Amortized % of Amortized % of Amortized % of
Cost Total Cost Total Cost Total
---- ----- ---- ----- ---- -----
(Dollars in Thousands)
Debt securities:
<S> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency securities .............. $29,504 79.89% $16,823 74.09% $11,024 57.47%
Other debt securities .............................. 2,503 6.78 1,615 7.11 5,129 26.74
------- ------ ------- ------ ------- ------
Total debt securities ............................ 32,007 86.67 18,438 81.20 16,153 84.21
Marketable equity securities ......................... 2,701 7.31 3,232 14.23 2,573 13.42
------- ------ ------- ------ ------- ------
Total debt and equity securities .................. 34,708 93.98 21,670 95.43 18,726 97.63
FHLB stock ........................................... 723 1.96 538 2.37 455 2.37
Certificates of deposit .............................. 1,500 4.06 500 2.20 -- --
------- ------ ------- ------ ------- ------
Total investment securities ................... $36,931 100.00% $22,708 100.00% $19,181 100.00%
======= ====== ======= ====== ======= ======
Other interest-earning assets:
Bank Liquidity Fund ................................ $ 25 0.39% $ 1,316 20.87% $ 720 27.72%
Federal funds sold ................................. 6,375 99.61 4,989 79.13 1,877 72.28
------- ------ ------- ------ ------- ------
Total other interest-earning assets .............. $ 6,400 100.00% $ 6,305 100.00% $ 2,597 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
The following table sets forth the composition of the Bank's
mortgage-backed securities at the dates indicated.
<TABLE>
<CAPTION>
June 30,
March 31, ---------------------------------------
1998 1997 1996
---------------- ----------------- ------------------
Amortized % of Amortized % of Amortized % of
Cost Total Cost Total Cost Total
---- ----- ---- ----- ---- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
GNMA .................. $ 327 4.48% $ 378 13.80% $ 427 20.34%
FNMA .................. 5,894 80.74 984 35.91 -- --
FHLMC ................. 1,003 13.74 1,371 50.04 1,658 78.99
------ ------ ------ ------ ------ ------
7,224 98.96 2,733 99.74 2,085 99.33
Unamortized premium,
net ................. 76 1.04 7 0.26 14 0.67
------ ------ ------ ------ ------ ------
Total mortgage-backed
securities ......... $7,300 100.00% $2,740 100.00% $2,099 100.00%
====== ====== ====== ====== ====== ======
</TABLE>
78
<PAGE>
The following table sets forth certain information regarding the
amortized cost and market values of the Bank's securities, at the dates
indicated.
<TABLE>
<CAPTION>
June 30,
------------------------------------------------
March 31, 1998 1997 1996
---------------------- ---------------------- -----------------------
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
---- ----- ---- ----- ---- -----
(Dollars in Thousands)
Debt securities:
<S> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency securities ............. $ 29,504 $ 29,638 $ 16,823 $ 16,642 $ 11,024 $ 10,809
Other debt securities ............................. 2,503 2,491 1,615 1,613 5,129 5,114
-------- -------- -------- -------- -------- --------
Total debt securities ......................... 32,007 32,129 18,438 18,255 16,153 15,923
Marketable equity securities ........................ 2,701 3,251 3,232 3,696 2,573 2,803
-------- -------- -------- -------- -------- --------
Total debt and equity securities .................. 34,708 35,380 21,670 21,951 18,726 18,726
FHLB stock .......................................... 723 723 538 538 455 455
Certificates of deposit ............................. 1,500 1,500 500 500 -- --
-------- -------- -------- -------- -------- --------
Total investment securities ................... 36,931 37,603 22,708 22,989 19,181 19,181
-------- -------- -------- -------- -------- --------
Mortgage-backed securities:
GNMA .............................................. 325 326 375 368 424 408
FNMA .............................................. 5,965 5,965 980 987 -- --
FHLMC ............................................. 1,010 1,014 1,385 1,390 1,675 1,668
-------- -------- -------- -------- -------- --------
Total mortgage-backed securities .............. 7,300 7,305 2,740 2,745 2,099 2,076
-------- -------- -------- -------- -------- --------
Net unrealized (losses) gains on
available-for-sale securities ..................... 677 286 (23)
-------- -------- --------
Total securities .................................... $ 44,908 $ 44,908 $ 25,734 $ 25,734 $ 21,257 $ 21,257
======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
The table below sets forth certain information regarding the amortized
cost, weighted average yields and contractual maturities of the Bank's
securities portfolio as of March 31, 1998.
<TABLE>
<CAPTION>
At March 31, 1998
---------------------------------------------------------------------------------------------------------
More Than One More Than Five More Than
One Year or Less Year to Five Years Years to Ten Year Ten Years Total
------------------ ------------------- ------------------- ------------------ --------------------
Weighted Weighted Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average Amortized Average Amortized Average
Cost Yield Cost Yield Cost Yield Cost Yield Cost Yield
---- ----- ---- ----- ---- ----- ---- ----- ---- -----
Debt securities
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Agency securities........$ -- --% $ 2,000 6.63% $25,504 6.87% $ 2,000 7.55% $29,504 6.90%
Other debt securities.... 500 5.25 1,000 6.13 1,003 6.91 -- -- 2,503 6.26
----- ------- ------- ------- -------
Total debt securities.. 500 5.25 3,000 6.46 26,507 6.87 2,000 7.55 32,007 6.85
Marketable equity
securities............... -- -- -- -- -- -- 2,701 2.52 2,701 2.52
FHLB stock................ -- -- -- -- -- -- 723 6.40 723 6.40
Certificates of deposit... 1,000 5.80 500 6.40 -- -- -- -- 1,500 6.00
----- ------- ------- ------- -------
Total investment
securities........... 1,500 5.62 3,500 6.45 26,507 6.87 5,424 4.89 36,931 6.70
----- ------- ------- ------- -------
Mortgage-backed
securities:
GNMA.....................$ -- -- $ -- -- $ -- -- $ 325 6.07 $ 325 6.07
FNMA..................... -- -- -- -- 1,306 6.86 4,659 5.36 5,965 5.69
FHLMC.................... 474 7.22 478 6.63 -- -- 58 10.00 1,010 7.10
----- ------- ------- ------- -------
Total mortgage-backed
securities.............. 474 7.22 478 6.63 1,306 6.86 5,042 5.46 7,300 5.90
----- ------- ------- --------- -------
Total securities..........$ 1,974 6.00% $ 3,976 6.47% $27,813 6.87% $10,466 5.17% $44,231 6.57%
======= ======= ======= ======= =======
</TABLE>
79
<PAGE>
Sources of Funds
General. Deposits, repayments and prepayments of loans, proceeds from
sales of loans and securities, proceeds from maturing securities and cash flows
from operations are the primary sources of the Bank's funds for use in lending,
investing and other general purposes. The Bank utilizes borrowed funds from the
FHLB to fund its loans in connection with its management of the interest rate
sensitivity of its assets and liabilities.
Deposits. The Bank offers a variety of deposit accounts with a range of
interest rates and terms. The Bank's deposit accounts consist of
non-interest-bearing checking accounts and interest-bearing NOW accounts,
savings accounts and money market deposit accounts (referred to in the aggregate
as "transaction accounts") and certificate of deposit accounts. The Bank offers
Individual Retirement Accounts ("IRAs") and other qualified plan accounts.
For the nine months ended March 31, 1998, the Bank had $98.1 million in
total average deposits, of which $50.6 million, or 51.5%, were transaction
accounts. Of the $49.8 million of certificate of deposit accounts at March 31,
1998, $42.3 million, or 84.9% were scheduled to mature within one year. While
this percentage is significant, based on its monitoring of historical trends in
deposit flows and its current pricing strategy for deposits, management believes
the Bank will retain a large portion of its certificate of deposit accounts upon
maturity.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market rates, prevailing interest rates and the
relative attractiveness of competing deposit and investment alternatives. During
the past few years, the strength of the stock market has affected deposit flows
as some customers have opted to place their funds in instruments such as mutual
funds rather than in deposit products perceived to have less attractive returns.
The Bank's deposits are obtained predominantly from the communities surrounding
its five branch offices in Norfolk County. The Bank relies primarily on
competitive pricing of its deposit products and customer service and
long-standing relationships with customers to attract and retain these deposits.
In addition, the Bank has actively marketed its core deposit products to elderly
customers in the Bank's market area through the organization of travel clubs
designed to promote savings by the Bank's senior citizen customers. Finally, the
Bank has emphasized the acquisition of customers dissatisfied with the less
personalized and more costly services provided by recently merged financial
institutions. However, market interest rates and rates offered by competing
financial institutions significantly affect the Bank's ability to attract and
retain deposits. The Bank uses traditional means of advertising its deposit
products, including transit and print media, and generally does not solicit
deposits from outside its market area. The Bank does not use brokers to obtain
deposits.
The following table presents the deposit activity of the Bank for the
periods indicated.
Nine Months
Ended March 31, Years Ended June 30,
---------------------- -----------------------
1998 1997 1997 1996
---- ---- ---- ----
(Dollars in Thousands)
Beginning balance ...... $ 92,897 $ 81,189 $ 81,189 $ 69,561
Deposits ............... 458,176 334,854 473,815 354,367
Withdrawals ............ 445,751 329,641 465,157 345,463
Interest credited ...... 2,734 2,238 3,050 2,724
-------- -------- -------- --------
Ending balance ......... $108,056 $ 88,640 $ 92,897 $ 81,189
======== ======== ======== ========
Net increase ........... $ 15,159 $ 7,451 $ 11,708 $ 11,628
======== ======== ======== ========
Percent increase ....... 16.32% 9.18% 14.42% 16.72%
======== ======== ======== ========
80
<PAGE>
The following tables set forth the distribution of the Bank's average
deposit accounts for the periods indicated and the weighted average interest
rates on each category of deposits presented. Averages for the periods presented
utilize average daily balances.
<TABLE>
<CAPTION>
For the Nine Months
Ended March 31, For the Year Ended June 30,
--------------------------------- ---------------------------------
1998 1997
--------------------------------- ---------------------------------
Percent Percent
of Total Weighted of Total Weighted
Average Average Average Average Average Average
Balance Deposits Rate Balance Deposits Rate
------- -------- ---- ------- -------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Money market accounts........... $ 8,806 8.97% 2.76% $ 7,854 9.28% 2.86%
Savings accounts................ 21,550 21.96 2.53 20,637 24.39 2.52
NOW accounts.................... 12,249 12.48 1.34 10,429 12.33 1.29
Non-interest-bearing accounts... 7,956 8.11 -- 6,638 7.85 --
------- ----- ---- --------
Total non-certificate accounts 50,561 51.52 1.88 45,558 53.85 1.93
------- ------ ---- --------
Certificates of deposit:
Less than six months............ 8,289 8.45 5.44 6,468 7.65 5.10
Over six through 12 months...... 20,804 21.20 5.74 15,347 18.14 5.52
Over 12 through 24 months....... 13,985 14.25 5.50 12,185 14.40 5.65
Over 24 months.................. 4,499 4.58 6.16 5,042 5.96 6.01
------- ------- -------- --------
Total certificate accounts 47,577 48.48 5.66 39,042 46.15 5.56
------- ------- ---- -------- --------
Total average deposits $98,138 100.00% 3.71% $ 84,600 100.00% 3.61%
======= ======= ======== =======
Certificates over $100,000 $ 7,798 5.76% $ 6,198 5.73%
======= ========
</TABLE>
For the Year Ended June 30,
1996
---------------------------------
Percent
of Total Weighted
Average Average Average
Balance Deposits Rate
------- -------- ----
Money market accounts........... $ 8,272 11.05% 2.77%
Savings accounts................ 19,847 26.51 2.53
NOW accounts.................... 9,900 13.22 1.56
Non-interest-bearing accounts... 4,825 6.45 --
------- -----
Total non-certificate accounts 42,844 57.23 2.07
Certificates of deposit:
Less than six months............ 4,828 6.45 5.28
Over six through 12 months...... 12,525 16.73 5.93
Over 12 through 24 months....... 9,337 12.47 5.73
Over 24 months.................. 5,327 7.12 5.73
------- -----
Total certificate accounts.. 32,017 42.77 5.74
------- -----
Total average deposits $ 74,861 100.00% 3.64
======= ======
Certificates over $100,000 $ 3,829 5.98%
=======
81
<PAGE>
The following table indicates the amount of the Bank's certificates of
deposit and other deposits by time remaining until maturity as of March 31,
1998.
<TABLE>
<CAPTION>
Maturity
-------------------------------------------------------------
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 Months Total
------- ------ ------ --------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Certificates of deposit less than $100,000....... $11,106 $12,386 $12,176 $6,353 $42,021
Weighted average rate....................... 5.73% 5.72% 5.62% 5.55% 5.67%
Certificates of deposit of $100,000 or more...... 2,290 2,233 2,080 1,163 7,766
Weighted average rate....................... 5.83% 5.76% 5.68% 5.92% 5.78%
Total certificates of deposit.................... $13,396 $14,619 $14,256 $7,516 $49,787
======= ======= ======= ====== =======
</TABLE>
Borrowings. The Bank utilizes advances from the FHLB primarily in
connection with its management of the interest rate sensitivity of its assets
and liabilities. The advances are collateralized primarily by certain of the
Bank's mortgage loans and secondarily by the Bank's investment in the stock of
the FHLB. The maximum amount that the FHLB will advance to member institutions,
including the Bank, fluctuates from time to time in accordance with the policies
of the FHLB. See "Regulation--Federal Home Loan Bank System." At March 31, 1998,
the Bank had $12.4 million in outstanding advances from the FHLB and had the
capacity to increase that amount to $41.8 million. The Bank expects to continue
to utilize borrowings from the FHLB as part of its management of the interest
sensitivity of its assets and liabilities.
The following table sets forth the maximum month-end balance and
average balance of FHLB advances for the periods indicated.
<TABLE>
<CAPTION>
Nine Months
Ended March 31, Years Ended June 30,
--------------- --------------------
1998 1997 1997 1996
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Maximum balance............................................... $14,451 $ 2,641 $ 3,401 $ 833
Average balance............................................... $ 5,648 $ 2,003 $ 2,161 $ 365
</TABLE>
The following table sets forth certain information as to the Bank's
FHLB advances at the dates indicated.
<TABLE>
<CAPTION>
June 30,
March 31, -------------------------------
1998 1997 1996
------------- ------------- -----------
(Dollars in Thousands)
<S> <C> <C> <C>
FHLB advances.................................... $ 12,404 $ 2,622 $ 369
Weighted average interest rate of FHLB advances 5.27% 5.69% 5.76%
</TABLE>
82
<PAGE>
Subsidiary Activities
Medway Securities Corp. Medway Securities Corp. ("Medway") is a
wholly-owned subsidiary of the Bank established in 1994 as a Massachusetts
security corporation for the purpose of buying, selling and holding investment
securities on its own behalf and not as a broker. The income earned on Medway's
investment securities is subject to a significantly lower rate of state tax than
that assessed on income earned on investment securities maintained at the Bank.
At March 31, 1998, Medway had total assets of $22.5 million, virtually all of
which were in investment securities.
Franklin Village Security Corp. Franklin Village Security Corp.
("Franklin Village") is a wholly-owned subsidiary of the Bank established in
1997. Franklin Village is also a Massachusetts security corporation and was
formed for the purpose of buying, selling and holding investment securities on
its own behalf and not as a broker. At March 31, 1998, Franklin Village had
total assets of $3.0 million, virtually all of which were in investment
securities.
Competition
The Bank faces significant competition both in making loans and in
attracting deposits. The Boston metropolitan area has a high density of
financial institutions, many of which are branches of significantly larger
institutions which have greater financial resources than the Bank, and all of
which are competitors of the Bank to varying degrees. The Bank's competition for
loans comes principally from commercial banks, savings banks, savings and loan
associations, mortgage banking companies, insurance companies and other
financial service companies. Its most direct competition for deposits has
historically come from commercial banks, savings banks, and savings and loan
associations. The Bank faces additional competition for deposits from
non-depository competitors such as the mutual fund industry, securities and
brokerage firms and insurance companies. Competition may also increase as a
result of the lifting of restrictions on the interstate operations of financial
institutions.
Year 2000 Issue
Many computer programs in use today can only distinguish the final two
digits of the year entered, and so they can be expected to read entries for the
year 2000 as the year 1900 and compute payment, interest or delinquency based on
the wrong date or can be expected to be unable to compute payment, interest or
delinquency. Rapid and accurate data processing is essential to the operation of
the Bank.
All of the material data processing of the Bank that could be affected
by this problem is provided by a third party service bureau. The service bureau
has advised the Bank that it expects to resolve this potential problem before
the year 2000. However, if the service bureau is unable to resolve this
potential problem in time, the Bank would likely experience significant data
processing delays, mistakes or failures. These delays, mistakes or failures
could have a significant adverse impact on the financial condition and results
of operation of the Bank. Based on information currently available, management
does not believe that significant additional costs will be incurred in
connection with the year 2000 issue.
83
<PAGE>
Properties
The Bank currently conducts its business through five full service
banking offices. The following table sets forth the Bank's offices at March 31,
1998.
<TABLE>
<CAPTION>
Net Book Value
of Property or
Leasehold
Date of Lease Improvements
Location Description Year Opened Owned/Leased Expiration At March 31, 1998
- ------------------------- ------------- ------------- ------------- ------------- -----------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
81 Main Street Main Office 1980 Owned -- $625
Medway, MA
1098 Main Street Branch Office 1962 Owned -- 128
Millis, MA
238 Main Street Branch Office 1990 Leased 1/30/99 --
Medfield, MA
1000 Franklin Village Drive Branch Office 1995 Leased 9/30/08 10
Franklin, MA
281A East Central Street Branch Office 1997 Leased 5/30/02 185
Franklin, MA
</TABLE>
Legal Proceedings
The Bank is not involved in any pending legal proceedings other than
routine legal proceedings occurring in the ordinary course of business which, in
the aggregate, involve amounts which are believed by management to be immaterial
to the financial condition and results of operations of the Bank.
Personnel
As of March 31, 1998, the Bank had 50 full-time equivalent employees.
The employees are not represented by a collective bargaining unit and the Bank
considers its relationship with its employees to be good. See "Management of the
Stock Bank--Compensation of Officers and Directors through Benefit Plans" for a
description of certain compensation and benefit programs offered to the Bank's
employees.
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FEDERAL AND STATE TAXATION
Federal Taxation
General. The Mutual Company, the Stock Company and the Bank are subject
to federal income taxation in the same general manner as other corporations,
with some exceptions discussed below. The following discussion of federal
taxation is intended only to summarize certain pertinent federal income tax
matters and is not a comprehensive description of the tax rules applicable to
these entities.
Method of Accounting. For federal income tax purposes, the Bank
currently reports its income and expenses on the accrual method of accounting
and uses a fiscal year ending June 30 for filing its consolidated federal income
tax returns.
Bad Debt Reserves. The Bank is permitted to establish a reserve for bad
debts and to make annual additions to the reserve. These additions can, within
specified formula limits, be deducted in arriving at the Bank's taxable income.
In addition, the 1996 Act requires the recapture (over a six year period) of the
excess of tax bad debt reserves accumulated after October 31, 1988. The amount
of such reserve subject to recapture by the Bank as of March 31, 1998 was
$266,000.
Taxable Distributions and Recapture. Prior to the 1996 Act, bad debt
reserves created prior to November 1, 1988 were subject to recapture into
taxable income should the Bank fail to meet certain thrift asset and
definitional tests. New federal legislation eliminated these thrift related
recapture rules. However, under current law, pre-1988 reserves remain subject to
recapture should the Bank make certain non-dividend distributions or cease to
maintain a bank charter. At June 30, 1996, the Bank's total federal pre-1988
reserve was $1.1 million. This reserve reflects the cumulative effects of
federal tax deductions by the Bank for which no federal income tax provision has
been made.
Minimum Tax. The Code imposes an alternative minimum tax ("AMT") at a
rate of 20% on a base of regular taxable income plus certain tax preferences
("alternative minimum taxable income" or "AMTI"). The AMT is payable to the
extent such AMTI is in excess of an exemption amount. Net operating losses can
offset no more than 90% of AMTI. Certain payments of alternative minimum tax may
be used as credits against regular tax liabilities in future years. The Bank has
not been subject to the alternative minimum tax and has no such amounts
available as credits for carryover.
Net Operating Loss Carryovers. A financial institution may carry back
net operating losses to the preceding two taxable years and forward to the
succeeding 20 taxable years. This provision applies to losses incurred in
taxable years beginning after 1996. At March 31, 1998, the Bank had no net
operating loss carryforwards for federal income tax purposes.
Corporate Dividends-Received Deduction. The Stock Company may exclude
from its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. Following completion of the reorganization and
Offering, it is expected that the Mutual Company will own less than 80% of the
outstanding common stock of the Stock Company. As such, the Mutual Company will
not be permitted to file a consolidated federal income tax return with the Stock
Company and the Bank. The corporate dividends-received deduction is 80% in the
case of dividends received from corporations with which a corporate recipient
does not file a consolidated return, and corporations which own less than 20% of
the stock of a corporation distributing a dividend may deduct only 70% of
dividends received or accrued on their behalf.
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State Taxation
Massachusetts State Taxation. For Massachusetts income tax purposes, a
consolidated tax return cannot be filed. Instead, the Bank and each of its
subsidiaries file an annual income tax return. The Bank is subject to an annual
Massachusetts excise tax at a rate of 11.32% of its net income currently and
declining in increments to 10.50% for the fiscal year ending June 30, 2000. In
addition, the Bank's two wholly owned subsidiaries are both securities
corporations and, accordingly, are subject to an excise tax at the rate of 1.32%
of its gross income. For these purposes, Massachusetts net income is defined as
gross income from all sources without any exclusions, less the following
deductions: all deductions (but not credits) which are allowable under the Code
except for those deductions under the Code relating to (1) dividends received,
(2) losses sustained in other taxable years and (3) taxes on or measured by
income, franchise taxes for the privilege of doing business and capital stock
taxes imposed by any state of the United States, the District of Columbia, the
Commonwealth of Puerto Rico, any territory or possession of the United States or
any foreign country, or a political subdivision of any of the foregoing. The
Bank is not permitted to carry its losses forward or back for Massachusetts tax
purposes. The Stock Company may apply to the Massachusetts Department of Revenue
to be classified as a Massachusetts security corporation. Bank holding companies
that are so classified are subject to a state tax rate of 0.33% of gross income.
REGULATION
General
The Bank is a Massachusetts-chartered stock savings bank and its
deposit accounts are insured up to applicable limits by the Bank Insurance Fund
("BIF") of the FDIC and by the Depositors Insurance Fund. The Bank is subject to
extensive regulation by the Massachusetts Division of Banks as its chartering
agency, and by the FDIC, as its deposit insurer. The Bank is required to file
reports with, and is periodically examined by, the FDIC and the Division
concerning its activities and financial condition and must obtain regulatory
approvals prior to entering into certain transactions, including, but not
limited to, mergers with or acquisitions of other savings institutions. The Bank
is a member of the Federal Home Loan Bank of Boston and is subject to certain
limited regulation by the Board of Governors of the Federal Reserve System. As
bank holding companies, the Mutual Company is and the Stock Company will be
subject to regulation by the FRB and the Division and required to file reports
with such regulatory bodies. Any change in such regulations, whether by the
Division, the FDIC, or the FRB could have a material adverse impact on the Bank,
the Stock Company, or the Mutual Company. Certain of the regulatory requirements
applicable to the Bank, the Stock Company and the Mutual Company are referred to
below or elsewhere herein.
Massachusetts Bank Regulation
As a Massachusetts-chartered savings bank, the Bank is subject to
supervision, regulation and examination by the Division and to various
Massachusetts statutes and regulations which govern, among other things,
investment powers, lending and deposit-taking activities, borrowings,
maintenance of surplus and reserve accounts, distribution of earnings, and
payment of dividends. In addition, the Bank is subject to Massachusetts consumer
protection and civil rights laws and regulations. The Division's approval is
required for a Massachusetts bank to establish or close branches, merge with
other banks, organize a holding company, issue stock and undertake certain other
activities.
Parity Regulation. Massachusetts regulation on parity with national
banks establishes procedures allowing state-chartered banks to exercise
additional or more flexible parallel powers granted to national banks under
federal law which are otherwise not permitted under state law. Under the parity
regulation, a bank which is either "adequately capitalized" or "well
capitalized," which has not been informed in writing by the Commissioner or an
applicable federal bank regulatory agency that it has been designated to be in
"troubled condition," and which has received as least a "satisfactory" CRA
rating (as defined below) during its most recent examination by the Commissioner
or other applicable federal banking regulatory agency may engage in certain
activities in which Massachusetts chartered banks ordinarily may not engage.
Such activities include, but are not limited to, the establishment of temporary
branch offices, investment in corporate affiliates and subsidiaries, engagement
in lease
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financing transactions, investment in community development and public welfare
projects, and the provision of tax planning and preparation, payroll and
financial planning services, among others. The procedures and requirements for
engaging in such activities range from an application process or expedited
review and notice process to no application or notice whatsoever. The applicable
procedures and requirements vary according to the nature of the activity to be
engaged in and the capitalization of the bank. As of the date of the prospectus,
the Bank was "adequately capitalized," had received a CRA rating of
"satisfactory" and was not in "troubled condition" and was therefore eligible to
engage in certain of the above-referenced activities, subject to the applicable
procedures and requirements of Massachusetts Regulation.
Investment Activities. As a Massachusetts-chartered savings bank, the
Bank may invest in preferred and common stock of any corporation provided such
investments do not involve control of any corporation and do not, in the
aggregate, exceed 4% of the Bank's deposits. Subject to certain limits, a
Massachusetts-chartered savings bank may invest up to 7% of its deposits in
investments not otherwise legally permitted, provided that any such amounts
which exceed 3% of deposits must be invested in companies organized for the
purpose of acquiring, constructing, rehabilitating, leasing, financing and
disposing of housing, and no investment in the equity securities or debt
securities of any one issuer made pursuant to such authority may exceed 2% of
the bank's deposits.
Regulatory Enforcement Authority. Any Massachusetts bank that does not
operate in accordance with the regulations, policies and directives of the
Commissioner may be subject to sanctions for non-compliance, including seizure
of the property and business of the bank and suspension or revocation of its
charter. The Commissioner may under certain circumstances suspend or remove
officers or directors who have violated the law, conducted the Bank's business
in a manner which is unsafe, unsound or contrary to the depositors' interests,
or been negligent in the performance of their duties. In addition, upon finding
that a bank has engaged in an unfair or deceptive act or practice, the
Commissioner may issue an order to cease and desist and impose a fine on the
bank concerned. Finally, Massachusetts consumer protection and civil rights
statutes applicable to the Bank permit private individual and class action law
suits and provide for the rescission of consumer transactions, including loans,
and the recovery of statutory and punitive damages and attorneys' fees in the
case of certain violations.
Depositors Insurance Fund. All Massachusetts-chartered savings banks
are required to be members of the Depositors Insurance Fund, a corporation that
insures savings bank deposits not covered by federal deposit insurance. The DIF
is authorized to charge savings banks an annual assessment of up to 1/16th of 1%
of a savings bank's deposits.
Insurance of Accounts and Regulation by the FDIC
The Bank is a member of the BIF, which is administered by the FDIC.
Deposits are insured up to applicable limits by the FDIC and such insurance is
backed by the full faith and credit of the U.S. Government. As insurer, the FDIC
charges deposit insurance premiums and is authorized to conduct examinations of
and to require reporting by FDIC-insured institutions. It also may prohibit any
FDIC-insured institution from engaging in any activity the FDIC determines by
regulation or order to pose a risk to the insurance fund. The FDIC also has the
authority to initiate enforcement actions against savings banks, after giving
the Commissioner an opportunity to take such action, and may terminate deposit
insurance if it determines that the institution has engaged or is engaging in
unsafe or unsound practices, or is in an unsafe or unsound condition.
The FDIC has authority under federal law to appoint a conservator or
receiver for an insured bank under certain circumstances. The FDIC is required,
with certain exceptions, to appoint a receiver or conservator for an insured
state bank if that bank was "critically undercapitalized" on average during the
calendar quarter beginning 270 days after the date on which the bank became
"critically undercapitalized." For this purpose, "critically undercapitalized"
means having a ratio of tangible capital to total assets of less than 2%. See
"--Prompt Corrective Action." The FDIC may also appoint a conservator or
receiver for a state bank on the basis of the institution's financial condition
or upon the occurrence of certain events, including: (i) insolvency (whereby the
assets of the bank
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are less than its liabilities to depositors and others); (ii) substantial
dissipation of assets or earnings through violations of law or unsafe or unsound
practices; (iii) existence of an unsafe or unsound condition to transact
business; (iv) likelihood that the bank will be unable to meet the demands of
its depositors or to pay its obligations in the normal course of business; and
(v) insufficient capital, or the incurring or likely incurring of losses that
will deplete substantially all of the institution's capital with no reasonable
prospect of replenishment of capital without federal assistance.
In September 1995, the BIF achieved its statutorily mandated reserve
levels. As a result, in 1995 the FDIC issued a final rule effective with respect
to the semi-annual premium assessment beginning January 1, 1996, which reduced
deposit insurance premiums for BIF member institutions to zero basis points
(subject to an annual minimum of $2,000) for institutions in the lowest risk
category. Deposit insurance premiums for Savings Association Insurance Fund
("SAIF") members were maintained at 23 basis points for institutions in the
lowest risk category because the SAIF had not achieved its required statutory
reserve levels.
On September 30, 1996, legislation was enacted to eliminate the premium
differential between SAIF-insured institutions and BIF-insured institutions by
recapitalizing the SAIF to the required ratio of 1.25% of insured deposits. The
legislation provided (i) that the holders of SAIF-assessable deposits pay a
one-time special assessment to recapitalize the SAIF, (ii) for the merger of the
BIF and the SAIF, with such merger being conditioned upon the prior elimination
of the thrift charter, and (iii) that BIF-insured institutions would share in
part in the obligation to repay Financing Corporation bonds that were issued in
1987 to help finance losses to the former insurance fund for state and federal
savings associations.
Following the imposition of the one-time special assessment, the FDIC
lowered assessment rates for SAIF members to reduce the disparity in the
assessment rates paid by BIF and SAIF members. From 1997 through 1999,
FDIC-insured institutions will pay approximately 1.3 basis points of their
BIF-assessable deposits and 6.4 basis points of their SAIF-assessable deposits
to fund the Financing Corporation bonds. The Bank's insurance premium, which had
amounted to the minimum $2,000 annual fee for its BIF-insured deposits, was
increased to 1.3 basis points.
Regulatory Capital Requirements
FDIC-insured savings banks are subject to risk-based capital guidelines
that establish a framework for making regulatory capital requirements more
sensitive to the risk profiles of each institution. The Bank is required to
maintain certain levels of regulatory capital in relation to risk-weighted
assets. The ratio of such regulatory capital to risk- weighted assets is
referred to as the Bank's "risk-based capital ratio." Risk-based capital ratios
are determined by allocating assets and specified off-balance sheet items to
four risk-weighted categories ranging from 0% to 100%, with higher levels of
capital being required for the categories perceived as representing greater
risk.
These guidelines divide a savings bank's capital into two tiers. The
first tier ("Tier I") includes common equity, retained earnings, certain
non-cumulative perpetual preferred stock (excluding auction rate issues) and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill and other intangible assets (except mortgage servicing rights and
purchased credit card relationships subject to certain limitations).
Supplementary ("Tier II") capital includes, among other items, cumulative
perpetual and long-term limited-life preferred stock, mandatory convertible
securities, certain hybrid capital instruments, term subordinated debt and the
allowance for loan and lease losses, subject to certain limitations, less
required deductions. Savings banks are required to maintain a total risk-based
capital ratio equal to at least 8% of risk-weighted assets, of which at least 4%
must be Tier I capital.
In addition, the FDIC has established regulations prescribing a minimum
Tier I leverage capital ratio (Tier I capital to adjusted total assets as
specified in the regulations). These regulations provide for a minimum Tier I
leverage ratio of 3% for banks that meet certain specified criteria, including
that they have the highest examination rating and are not experiencing or
anticipating significant growth. All other banks are required to maintain a Tier
I leverage ratio of 3% plus an additional cushion of at least 100 to 200 basis
points. The FDIC may, however, set higher
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leverage and risk-based capital requirements on individual institutions when
particular circumstances warrant. Savings banks experiencing or anticipating
significant growth are expected to maintain capital ratios, including tangible
capital positions, well above the minimum levels.
The FDIC has also proposed that a bank's interest rate risk exposure
should be quantified using either the measurement system set forth in the
proposal or the institution's internal model for measuring such exposure.
Management of the Bank has not determined what effect, if any, the proposed
interest rate risk component would have on the Bank's capital if adopted as
proposed.
Standards for Safety and Soundness
The federal banking agencies have adopted a final regulation and
Interagency Guidelines Prescribing Standards for Safety and Soundness
("Guidelines") to implement the safety and soundness standards required under
federal law. The Guidelines set forth the safety and soundness standards that
the federal banking agencies use to identify and address problems at insured
depository institutions before capital becomes impaired. The standards set forth
in the Guidelines address internal controls and information systems; internal
audit program; credit underwriting; loan documentation; interest rate risk
exposure; asset growth; and compensation, fees and benefits. The agencies also
adopted additions to the Guidelines which require institutions to examine asset
quality and earnings standards. If the appropriate federal banking agency
determines that an institution fails to meet any standard prescribed by the
Guidelines, the agency may require the institution to submit to the agency an
acceptable plan to achieve compliance with the standard, as required by federal
law. The final regulations establish deadlines for the submission and review of
such safety and soundness compliance plans.
Limitations on Dividends and Other Capital Distributions
The FDIC has the authority to use its enforcement powers to prohibit a
savings bank from paying dividends if, in its opinion, the payment of dividends
would constitute an unsafe or unsound practice. Federal law also prohibits the
payment of dividends by a bank that will result in the bank failing to meet its
applicable capital requirements on a pro forma basis. Massachusetts law also
restricts the Bank from declaring a dividend which would reduce its capital
below (i) the amount required to be maintained by state and federal law and
regulations, or (ii) the amount of the Bank's liquidation account established in
connection with the Reorganization.
Prompt Corrective Action
The federal banking agencies have promulgated regulations to implement
the system of prompt corrective action required by federal law. Under the
regulations, a bank shall be deemed to be (i) "well capitalized" if it has total
risk-based capital of 10.0% or more, has a Tier I risk-based capital ratio of
6.0% or more, has a Tier I leverage capital ratio of 5.0% or more and is not
subject to any written capital order or directive; (ii) "adequately capitalized"
if it has a total risk-based capital ratio of 8.0% or more, a Tier I risk-based
capital ratio of 4.0% or more and a Tier I leverage capital ratio of 4.0% or
more (3.0% under certain circumstances) and does not meet the definition of
"well capitalized"; (iii) "undercapitalized" if it has a total risk-based
capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that is
less than 4.0% or a Tier I leverage capital ratio that is less than 4.0% (3.0%
under certain circumstances); (iv) "significantly undercapitalized" if it has a
total risk-based capital ratio that is less than 6.0%, a Tier I risk-based
capital ratio that is less than 3.0% or a Tier I leverage capital ratio that is
less than 3.0%; and (v) "critically undercapitalized" if it has a ratio of
tangible equity to total assets that is equal to or less than 2.0%. Federal law
and regulations also specify circumstances under which a federal banking agency
may reclassify a well capitalized institution as adequately capitalized and may
require an adequately capitalized institution to comply with supervisory actions
as if it were in the next lower category (except that the FDIC may not
reclassify a significantly undercapitalized institution as critically
undercapitalized).
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"Undercapitalized" banks are subject to growth, capital distribution
(including dividend) and other limitations and are required to submit a capital
restoration plan. A bank's compliance with such plan is required to be
guaranteed by any company that controls the undercapitalized institution. If an
"undercapitalized" bank fails to submit an acceptable plan, it is treated as if
it is "significantly undercapitalized." "Significantly undercapitalized" banks
are subject to one or more of a number of additional restrictions, including an
order by the FDIC to sell sufficient voting stock to become adequately
capitalized, requirements to reduce total assets and cease receipt of deposits
from correspondent banks or to dismiss directors or officers, and restrictions
on interest rates paid on deposits, compensation of executive officers and
capital distributions by a parent holding company.
Based on the foregoing, the Bank is currently classified as a "well
capitalized" savings institution.
Activities and Investments of Insured State-Chartered Banks
Federal law generally limits the activities and equity investments of
FDIC-insured, state-chartered banks to those that are permissible for national
banks, notwithstanding state laws. Under regulations dealing with equity
investments, an insured state bank generally may not, directly or indirectly,
acquire or retain any equity investment of a type, or in an amount, that is not
permissible for a national bank. An insured state bank is not prohibited from,
among other things: (i) acquiring or retaining a majority interest in a
subsidiary; (ii) investing as a limited partner in a partnership, the sole
purpose of which is direct or indirect investment in the acquisition,
rehabilitation, or new construction of a qualified housing project, provided
that such limited partnership investments may not exceed 2% of the bank's total
assets; (iii) acquiring up to 10% of the voting stock of a company that solely
provides or reinsures directors', trustees' and officers' liability insurance
coverage or bankers' blanket bond group insurance coverage for insured
depository institutions; and (iv) acquiring or retaining, through a subsidiary,
up to 10% of the voting shares of a depository institution if certain
requirements are met.
Federal law and FDIC regulations permit certain exceptions to the
foregoing limitations. For example, certain state-chartered banks, such as the
Bank, may continue to invest, up to certain limits, in common or preferred stock
listed on a National Securities Exchange or the National Market System of
NASDAQ, and in the shares of an investment company registered under the
Investment Company Act of 1940, as amended. Such banks may also continue to sell
savings bank life insurance. As of March 31, 1998, the Bank had marketable
equity securities with a cost of $2.7 million pursuant to this exception.
Transactions with Affiliates and Insiders of the Bank
Under current federal law, transactions between depository institutions
and their affiliates are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a savings bank is any company or entity that controls, is
controlled by, or is under common control with the savings bank, other than a
subsidiary. In a holding company context, at a minimum, the parent holding
company of a savings bank and any companies which are controlled by such parent
holding company are affiliates of the savings bank. Generally, Section 23A
limits the extent to which the savings bank or its subsidiaries may engage in
"covered transactions" with any one affiliate to an amount equal to 10% of such
savings bank's capital stock and surplus, and contains an aggregate limit on all
such transactions with all affiliates to an amount equal to 20% of such capital
stock and surplus. The term "covered transaction" includes the making of loans
or other extensions of credit to an affiliate; the purchase of assets from an
affiliate; the purchase of, or an investment in, the securities of an affiliate;
the acceptance of securities of an affiliate as collateral for a loan or
extension of credit to any person; or issuance of a guarantee, acceptance or
letter of credit on behalf of an affiliate. Section 23A also establishes
specific collateral requirements for loans or extensions of credit to, or
guarantees, acceptances or letters of credit issued on behalf of an affiliate.
Section 23B requires that covered transactions and a broad list of other
specified transactions be on terms substantially the same, or no less favorable,
to the savings bank or its subsidiary as similar transactions with
nonaffiliates.
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Further, Section 22(h) of the Federal Reserve Act restricts a savings
bank with respect to loans to directors, executive officers and principal
stockholders. Under Section 22(h), loans to directors, executive officers and
stockholders who control, directly or indirectly, 10% or more of voting
securities of a savings bank, and certain related interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
persons and affiliated entities, the savings bank's total capital and surplus.
Section 22(h) also prohibits loans above amounts prescribed by the appropriate
federal banking agency to directors, executive officers and shareholders who
control 10% or more of voting securities of a stock savings bank, and their
respective related interests, unless such loan is approved in advance by a
majority of the board of directors of the savings bank. Any "interested"
director may not participate in the voting. The loan amount (which includes all
other outstanding loans to such person) as to which such prior board of director
approval is required, is the greater of $25,000 or 5% of capital and surplus or
any loans over $500,000. Further, pursuant to Section 22(h), loans to directors,
executive officers and principal shareholders must generally be made on terms
substantially the same as offered in comparable transactions to other persons.
Section 22(g) of the Federal Reserve Act places additional limitations on loans
to executive officers.
Holding Company Regulation
General. Upon consummation of the reorganization, the Stock Company, as
the sole shareholder of the Bank, will a become bank holding company. The Mutual
Company will remain a bank holding company as the indirect controlling
shareholder of the Bank. Bank holding companies are subject to comprehensive
regulation and regular examinations by the FRB and the Division. The FRB also
has extensive enforcement authority over bank holding companies, including,
among other things, the ability to assess civil money penalties, to issue cease
and desist or removal orders and to require that a holding company divest
subsidiaries (including its bank subsidiaries). In general, enforcement actions
may be initiated for violations of law and regulations and unsafe or unsound
practices. As a savings bank, the Bank may elect to have the Stock Company and
the Mutual Company regulated as savings and loan holding companies by the Office
of Thrift Supervision ("OTS"). Regulation as a savings and loan holding company
would require application to, and prior approval of, the OTS.
After consummation of the reorganization and Offering, the Stock
Company will be subject to capital adequacy guidelines for bank holding
companies (on a consolidated basis) which are substantially similar to those of
the FDIC for the Bank. On a pro forma consolidated basis after the
reorganization and Offering, the Stock Company's pro forma stockholders' equity
will exceed these requirements.
Under FRB policy, a bank holding company must serve as a source of
strength for its subsidiary bank. Under this policy, the FRB may require, and
has required in the past, a holding company to contribute additional capital to
an undercapitalized subsidiary bank.
A bank holding company must obtain Massachusetts Board of Bank
Incorporation and FRB approval before: (i) acquiring, directly or indirectly,
ownership or control of any voting shares of another bank or bank holding
company if, after such acquisition, it would own or control more than 5% of such
shares (unless it already owns or controls the majority of such shares); (ii)
acquiring all or substantially all of the assets of another bank or bank holding
company; or (iii) merging or consolidating with another bank holding company.
The Bank Holding Company Act also prohibits a bank holding company,
with certain exceptions, from acquiring direct or indirect ownership or control
of more than 5% of the voting shares of any company which is not a bank or bank
holding company, or from engaging directly or indirectly in activities other
than those of banking, managing or controlling banks, or providing services for
its subsidiaries. The principal exceptions to these prohibitions involve certain
non-bank activities which, by statute or by FRB regulation or order, have been
identified as activities closely related to the business of banking or managing
or controlling banks. The list of activities permitted by the FRB includes,
among other things, operating a savings institution, mortgage company, finance
company, credit card company or factoring company; performing certain data
processing operations; providing certain investment and financial advice;
underwriting and acting as an insurance agent for certain types of
credit-related insurance; leasing
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property on a full-payout, non-operating basis; selling money orders, travelers'
checks and United States Savings Bonds; real estate and personal property
appraising; providing tax planning and preparation services; and, subject to
certain limitations, providing securities brokerage services for customers. The
Stock Company and the Mutual Company have no present plans to engage in any of
these activities.
Interstate Banking and Branching. Federal law allows the FRB to approve
an application of an adequately capitalized and adequately managed bank holding
company to acquire control of, or acquire all or substantially all of the assets
of, a bank located in a state other than such holding company's home state,
without regard to whether the transaction is prohibited by the laws of any
state. The FRB may not approve the acquisition of the bank that has not been in
existence for the minimum time period (not exceeding five years) specified by
the statutory law of the host state. The FRB is prohibited from approving an
application if the applicant (and its depository institution affiliates)
controls or would control more than 10% of the insured deposits in the United
States or 30% or more of the deposits in the target bank's home state or in any
state in which the target bank maintains a branch. Individual states continue to
have authority to limit the percentage of total insured deposits in the state
which may be held or controlled by a bank or bank holding company to the extent
such limitation does not discriminate against out-of-state banks or bank holding
companies. Individual states may also waive the 30% state-wide concentration
limit referred to above.
Additionally, beginning on June 1, 1997, the federal banking agencies
were authorized to approve interstate merger transactions without regard to
whether such transactions are prohibited by the law of any state, unless the
home state of one of the banks "opted out" by adopting a law which applies
equally to all out-of-state banks and expressly prohibits merger transactions
involving out-of-state banks. Interstate acquisitions of branches are permitted
only if the law of the state in which the branch is located permits such
acquisitions.
In 1996, the Massachusetts legislature enacted a new interstate banking
statute pursuant to which an out-of-state bank may (subject to various
regulatory approvals and to reciprocity in its home state) establish and
maintain bank branches in Massachusetts by (i) merging with a Massachusetts bank
that has been in existence for at least three years, (ii) acquiring a branch or
branches of a Massachusetts bank without acquiring the entire bank, or (iii)
opening such branches de novo. Massachusetts banks' ability to exercise similar
interstate banking powers in other states depend upon the laws of the other
states. For example, according to the law of the bordering state of New
Hampshire, out-of-state banks may acquire New Hampshire banks by merger, but may
not acquire individual branches or establish de novo bank branches in New
Hampshire.
Federal law authorizes the FDIC to approve interstate branching de novo
by national and state banks, respectively, only in states which specifically
allow for such branching. The appropriate federal banking agencies are required
to prescribe regulations which prohibit any out-of-state bank from using the
interstate branching authority primarily for the purpose of deposit production.
The FDIC and FRB have adopted such regulations. These regulations include
guidelines to ensure that interstate branches operated by an out-of-state bank
in a host state are reasonably helping to meet the credit needs of the
communities which they serve. Should the FDIC determine that a bank's interstate
branch is not reasonably helping to meet the credit needs of the communities
serviced by the interstate branch, the FDIC is authorized to close the
interstate branch or not permit the bank to open a new branch in the state in
which the bank previously opened an interstate branch.
Dividends. The FRB has issued a policy statement on the payment of cash
dividends by bank holding companies, which expresses the FRB's view that a bank
holding company should pay cash dividends only to the extent that the holding
company's net income for the past year is sufficient to cover both the cash
dividends and a rate of earnings retention that is consistent with the holding
company's capital needs, asset quality and overall financial condition. The FRB
also indicated that it would be inappropriate for a company experiencing serious
financial problems to borrow funds to pay dividends. Furthermore, under the
prompt corrective action regulations adopted by the FRB, the FRB may prohibit a
bank holding company from paying any dividends if the holding company's bank
subsidiary is classified as "undercapitalized." See "--Regulatory Capital
Requirements."
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Bank holding companies are required to give the FRB prior written
notice of any purchase or redemption of its outstanding equity securities if the
gross consideration for the purchase or redemption, when combined with the net
consideration paid for all such purchases or redemptions during the preceding 12
months, is equal to 10% or more of the consolidated net worth of the bank
holding company. The FRB may disapprove such a purchase or redemption if it
determines that the proposal would constitute an unsafe or unsound practice or
would violate any law, regulation, FRB order, or any condition imposed by, or
written agreement with, the FRB. This notification requirement does not apply to
any company that meets the well-capitalized standard for commercial banks, has a
safety and soundness examination rating of at least a "2" and is not subject to
any unresolved supervisory issues.
Dividend Waivers by the Mutual Company. It has been the policy of many
mutual holding companies to waive the receipt of dividends declared by their
savings institution subsidiary. In connection with its approval of mutual
holding company reorganizations since 1994, however, the FRB has imposed certain
conditions on the waiver of dividends by mutual holding companies declared on
the common stock of subsidiary savings banks, and the Mutual Company expects
that the FRB will impose such conditions on any dividend waivers by the Mutual
Company on the common stock of the Stock Company.
In particular, it is expected that the FRB will require that the amount
of any waived dividends will not be available for payment to Minority
Stockholders and will be excluded from capital for purposes of calculating
dividends payable to Minority Stockholders. Moreover, the cumulative amount of
waived dividends must be maintained in a restricted capital account which would
be added to any liquidation account of the Bank in the event of a Conversion
Transaction, and would not be available for distribution to Minority
Stockholders. The restricted capital account and liquidation account amounts
would not be reflected in the Bank's financial statements or the notes thereto,
but would be considered as a notational or memorandum account of the Bank, and
would be maintained in accordance with the rules, regulations and policy of the
Office of Thrift Supervision except that such rules would be administered by the
FRB, and any other rules and regulations adopted by the FRB. The stock issuance
plan also provides that if the Mutual Company converts to stock form in the
future, any waived dividends may reduce the Minority Ownership Interest
following such Conversion Transaction. See "The Reorganization and
Offering--Conversion of Mutual Company to Stock Form."
If the Mutual Company decides that it is in its best interest to waive
a particular dividend to be paid by the Stock Company, and the FRB and the
Division approve such waiver, then the Stock Company would pay such dividend
only to Minority Stockholders, and the amount of the dividend waived by the
Mutual Company would be treated in the manner described above. The Mutual
Company's decision as to whether or not to waive a particular dividend, if such
waiver is approved by the FRB and the Division, will depend on a number of
factors, including the Mutual Company's capital needs, the investment
alternatives available to the Mutual Company as compared to those available to
the Stock Company, and regulatory approvals. There can be no assurance (i) that
after the reorganization the Mutual Company will waive dividends paid by the
Stock Company, (ii) that the FRB and the Division will approve any dividend
waivers by the Mutual Company or (iii) of the terms that may be imposed by the
FRB or the Division on any dividend waiver.
Federal Securities Law
The common stock of the Stock Company to be issued in the Offering will
be registered with the Securities and Exchange Commission ("SEC") under the
Exchange Act. The Stock Company will be subject to the information, proxy
solicitation, insider trading restrictions and other requirements of the SEC
under the Exchange Act.
Stock Company common stock held by persons who are affiliates
(generally officers, directors and principal stockholders) of the Stock Company
may not be resold without registration, unless such common stock is sold in
accordance with certain resale restrictions. If the Stock Company meets
specified current public information requirements, each affiliate of the Stock
Company is able to sell in the public market, without registration, a limited
number of shares in any three-month period.
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Federal Reserve System
The FRB requires all depository institutions to maintain
noninterest-bearing reserves at specified levels against their transaction
accounts (primarily checking, NOW and Super NOW checking accounts). At March 31,
1998, the Bank was in compliance with these reserve requirements. Savings banks
are authorized to borrow from the Federal Reserve Bank "discount window," but
FRB regulations require savings banks to exhaust other reasonable alternative
sources of funds, including FHLB borrowings, before borrowing from the Federal
Reserve Bank.
Community Reinvestment Act
Under the Community Reinvestment Act, as amended (the "CRA"), as
implemented by FDIC regulations, a savings bank has a continuing and affirmative
obligation, consistent with its safe and sound operation, to help meet the
credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the FDIC, in connection with its examination of a savings institution,
to assess the institution's record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications
by such institution, including applications to acquire branches and other
financial institutions. The CRA requires the FDIC to provide a written
evaluation of an institution's CRA performance utilizing a four-tiered
descriptive rating system. The Bank's latest CRA rating was "satisfactory."
Massachusetts has its own statutory counterpart to the Community
Reinvestment Act which is also applicable to the Bank. The Massachusetts version
is generally similar to the Community Reinvestment Act but utilizes a five-
tiered descriptive rating system. Massachusetts law requires the Commissioner to
consider, but not be limited to, a bank's record of performance under
Massachusetts law in considering any application by the bank to establish a
branch or other deposit-taking facility, to relocate an office, or to merge or
consolidate with or acquire the assets and assume the liabilities of any other
banking institution. The Bank's most recent rating under the Massachusetts law
was "satisfactory."
Consumer Protection and Fair Lending Regulations
The Bank is subject to a variety of federal and Massachusetts statutes
and regulations that are intended to protect consumers and prohibit
discrimination in the granting of credit. These statutes and regulations provide
for a range of sanctions for non-compliance, including imposition of
administrative fines and remedial orders, and referral to the Attorney General
for prosecution of a civil action for actual and punitive damages and injunctive
relief. Certain of these statutes authorize private individual and class action
lawsuits and the award of actual, statutory and punitive damages and attorneys'
fees for certain types of violations.
Federal Home Loan Bank System
The Bank is a member of the FHLB of Boston, which is one of 12 regional
FHLBs, that administers the home financing credit function of savings
institutions. Each FHLB serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from proceeds derived from
the sale of consolidated obligations of the FHLB System. It makes loans to
members (i.e., advances) in accordance with policies and procedures established
by the board of directors of the FHLB. These policies and procedures are subject
to the regulation and oversight of the Federal Housing Finance Board. All
advances from the FHLB are required to be fully secured by sufficient collateral
as determined by the FHLB.
As a member, the Bank is required to purchase and maintain stock in the
FHLB of Boston. At March 31, 1998, the Bank owned $723,000 of FHLB stock. In
past years, the Bank has received dividends on its FHLB stock.
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The dividend yield from FHLB stock was 6.48% for the year ended December 31,
1997. No assurance can be given that such dividends will continue in the future
at such levels.
Under federal law, the FHLBs are required to provide funds for the
resolution of troubled savings institutions and to contribute to low and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of the Bank's FHLB stock may result in a corresponding
reduction in the Bank's capital.
MANAGEMENT OF THE STOCK COMPANY
Directors of the Stock Company
The Board of Directors of the Stock Company currently consists of 16
members, each of whom is currently serving as a trustee of the Mutual Company.
The current directors are as follows:
Name Age (1) Term Expires
- --------------------------- ------- ------------
Kelly A. Adler 37 2000
Harold W. Bemis 71 1998
William L. Casey 49 1998
Paul J. DeSimone 65 1999
John G. Dugan 47 1998
Richard Giusti 53 1999
John Hasenjaeger 55 1998
Robert J. Heavey 68 1998
Thomas R. Howie 55 1999
Kenneth C.A. Isaacs 45 2000
Paul V. Kenney 35 2000
Eugene R. Liscombe 52 2000
James W. Murphy 63 1999
Robert A. Matson 38 2000
Lawrence E. Novick 58 1998
Eugene G. Stone 62 2000
- ---------------
(1) As of March 31, 1998.
Each director of the Stock Company has served as such since the Stock
Company's incorporation in June 1998. Directors of the Stock Company will serve
three-year staggered terms so that approximately one-third of the directors will
be elected at each annual meeting of stockholders.
The reorganization and the Offering will not result initially in an
increase in the total compensation currently paid to directors of the Bank. Such
compensation, however, will be paid in part by the Mutual Company, the Stock
Company and the Bank based on the services performed by such individuals for
such entities. Subsequent to the reorganization and the Offering, compensation
of the directors of the Stock Company may be increased to reflect the additional
responsibilities of directors of a stock company with public stockholders.
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Executive Officers of the Stock Company
The following individuals are executive officers of the Stock Company
and hold the offices set forth below opposite their respective names. The
biographical information for each executive officer is set forth under
"Management of the Bank--Biographical Information."
Name Age (1) Position
- ---- ------- --------
Eugene G. Stone 62 President and Chief Executive Officer
Warren W. Chase, Jr. 51 Vice President and Treasurer
Michael A. Dalrymple 53 Vice President
Kevin H. Kane 44 Vice President
John J. Mogan, Jr. 55 Vice President
Pamela J. Mozynski 34 Vice President
Daniel G. Trombley 48 Vice President
- ---------------
(1) As of March 31, 1998.
The Board of Directors of the Stock Company shall appoint a President,
a Chief Executive Officer, and one or more Vice Presidents after the annual
meeting of stockholders. The Board of Directors may appoint such other officers
from time to time as it may deem proper.
Since the formation of the Stock Company, none of the executive
officers has received remuneration from the Stock Company. It is not anticipated
that the executive officers of the Stock Company will initially receive any
remuneration in his or her capacity as an executive officer. For information
concerning compensation of executive officers of the Bank, see "Management of
the Stock Bank."
Board of Directors and Committees of the Stock Company
The Board of Directors of the Stock Company is expected to meet
quarterly following the reorganization and Offering, or more often as may be
necessary. The directors of the Stock Company will receive a $1,000 annual
retainer fee for serving on the Stock Company's Board of Directors.
The Board of Directors initially is expected to have, among others, a
standing Executive Committee and Audit Committee. The Stock Company's full Board
of Directors will act as the Nominating Committee, or may appoint a Nominating
Committee. The Stock Company does not intend initially to have a Compensation
Committee, as it is not anticipated that the officers of the Stock Company will
initially be compensated as such.
The Executive Committee initially will consist of directors Kelly A.
Adler, William L. Casey, Richard Giusti, Kenneth C.A. Isaacs, Robert A. Matson,
Lawrence E. Novick and Eugene G. Stone. The Executive Committee is expected to
meet as necessary when the Board is not in session to exercise general control
and supervision in all matters pertaining to the interests of the Stock Company,
subject at all times to the direction of the Board of Directors.
The Audit Committee initially will consist of directors John G. Dugan,
Eugene R. Liscombe, and Thomas R. Howie. The Audit Committee is expected to meet
at least quarterly to examine and approve the audit report prepared by the
independent auditors of the Stock Company, to review and to recommend the
independent auditors to be engaged by the Stock Company, to review the internal
accounting controls of the Stock Company, and to review and approve audit
policies.
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Indemnification and Limitation of Liability
The Articles of Organization of the Stock Company provide that a
director or officer of the Stock Company shall be indemnified by the Stock
Company to the fullest extent authorized by Massachusetts law against all
expenses, liability and loss reasonably incurred or suffered by such person in
connection with his activities as a director or officer or as a director or
officer of another company, if the director or officer held such position at the
request of the Stock Company. Massachusetts law requires that such director,
officer, employee or agent, in order to be indemnified, must have acted in good
faith and in a manner reasonably believed to be not opposed to the best
interests of the Stock Company and, with respect to any criminal action or
proceeding, either had reasonable cause to believe such conduct was lawful or
did not have reasonable cause to believe his conduct was unlawful.
The Articles of Organization and Massachusetts law also provide that
the Stock Company may maintain insurance, at its expense, to protect itself and
any director, officer, employee or agent of the Stock Company or another
corporation, partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Stock Company has the power to
indemnify such person against such expense, liability or loss under
Massachusetts law. The Stock Company intends to obtain such insurance.
Finally, the Articles of Organization provide that no director of the
Stock Company shall be personally liable to the Stock Company or its
stockholders for monetary damages for breach of fiduciary duty as a director
notwithstanding any provision of law imposing such liability, provided that the
Articles of Organization do not eliminate or limit any liability of a director
(i) for breach of such director's duty of loyalty to the Stock Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) with respect to any
transaction from which the director derived an improper personal benefit, (iv)
for voting to approve the loan of Stock Company assets to Stock Company officers
or directors, unless such loan could reasonably be expected to benefit the Stock
Company, or (v) for voting to authorize a distribution to stockholders or a
repurchase or redemption of common stock if such distribution, repurchase or
redemption violates the Articles of Organization or renders the Stock Company
insolvent.
MANAGEMENT OF THE BANK
Directors of the Bank
The directors of the Bank have three year terms which are staggered to
provide for the election of approximately one-third of the board members each
year. Directors of the Bank will be elected by the Stock Company as sole
stockholder of the Bank. The current directors of the Bank are as follows:
Director Age (1) Term Expires
- -------- ------- ------------
Kelly A. Adler 37 2002
William L. Casey 49 2001
Richard Giusti 53 2000
Kenneth C.A. Isaacs 45 2002
Robert A. Matson 38 2002
Lawrence E. Novick 58 2001
Eugene G. Stone 62 2001
- ---------------
(1) As of March 31, 1998.
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Executive Officers of the Bank
The following table sets forth certain information regarding the
executive officers of the Bank.
Name Age (1) Position
- ---- ------- --------
Eugene G. Stone 62 President and Chief Executive Officer
Warren W. Chase, Jr. 51 Vice President and Treasurer
Michael A. Dalrymple 53 Vice President
Kevin H. Kane 44 Vice President
John J. Mogan, Jr. 55 Vice President
Pamela J. Mozynski 34 Vice President
Daniel G. Trombley 48 Vice President
Kelly A. Adler 37 Clerk of the Board
- ---------------
(1) As of March 31, 1998.
The executive officers of the Bank will be elected annually by the
Board of Directors at its first meeting following the annual meeting of
stockholders of the Bank. The Clerk will be elected by the stockholders of the
Bank at annual meetings of the stockholders of the Bank.
Biographical Information
Directors of the Stock Company
Kelly A. Adler has served as a trustee of the Bank since 1995 and a
member of the Bank's Audit Committee since 1996. Ms. Adler continues to serve as
a trustee of the Mutual Company as a director of the Bank, and as Clerk of the
Bank. Ms. Adler is an accountant and has served on several town committees in
Medway, Massachusetts.
Harold W. Bemis has served as a trustee of the Bank since 1967 and as a
member of the Bank's Audit Committee from 1992 to 1994. Mr. Bemis continues to
serve as a trustee of the Mutual Company. He is a retired contractor and
life-long resident of Medway, Massachusetts.
William L. Casey has served as a trustee of the Bank since 1995 and,
since 1997, has served as Chairman of the Board of Trustees of the Mutual
Company. Mr. Casey also serves on the Board of Directors of the Bank. He is the
Corporate Manager of Credit and Sales Accounting at Analog Devices, Inc.,
Norwood, Massachusetts, an integrated circuit manufacturer. Mr. Casey serves on
several town and community boards in Millis, Massachusetts.
Paul J. DeSimone has served as a trustee of the Bank since 1995 and
currently serves on the Board of Trustees of the Mutual Company. Mr. DeSimone is
owner of DeSimone Surveying Service, a civil engineering firm in Medway,
Massachusetts. Mr. DeSimone has served on the boards of a number of civic and
charitable organizations.
John G. Dugan has served as a trustee of the Bank since 1990 and
continues to serve as a trustee of the Mutual Company. Mr. Dugan also serves on
the Audit Committee of the Mutual Company. He is an attorney in the law firm of
Dugan & Cannon of Medfield, Massachusetts, and serves as town moderator for the
town of Millis. Mr. Dugan participates in a number of civic and charitable
organizations.
Richard Giusti has served as a trustee of the Bank since 1991 and
served on the Bank's Audit Committee from 1994 to 1995. Mr. Giusti continues to
serve as a trustee of the Mutual Company and a director of the Bank. He is
Manager of Administration & Finance of the Metropolitan Machine Co., Inc., a
machine company. Mr. Giusti is involved in various civic activities as well.
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John Hasenjaeger has served as a trustee of the Bank since 1995 and
continues to serve as a trustee of the Mutual Company. He is owner of a real
estate firm and also is a professor of management at Boston College School of
Management.
Robert J. Heavey has served as a trustee of the Bank since 1981 and
served as Chairman of the Board of Trustees of the Bank from 1991 to 1994. He
continues to serve as a trustee of the Mutual Company. Mr. Heavey is President
and Treasurer of RJ Heavey Co., Inc., a plumbing company in Walpole,
Massachusetts. He also serves several civic and charitable organizations.
Thomas R. Howie has served as a trustee of the Bank since 1988 and
served on the Bank's Board of Investment from 1990 to 1994 and on its Audit
Committee since 1995. Mr. Howie continues to serve as a trustee of the Mutual
Company. He is Vice President of Howie Oil Company, Inc., a heating oil
distributor in Millis, Massachusetts. He is involved in various charitable and
civic organizations.
Kenneth C.A. Isaacs has served as a trustee of the Bank since 1997. He
continues to serve as a trustee of the Mutual Company and also is a director of
the Bank. Mr. Isaacs is a private trustee with extensive real estate experience.
Paul V. Kenney has served as a trustee of the Bank since 1992, and
continues to serve as a trustee of the Mutual Company. He is a member of the law
firm Kenney and Maciolek of Medway, Massachusetts. He also serves several civic
organizations.
Eugene R. Liscombe has served as a trustee of the Bank since 1991 and
served on its Board of Investment from 1991 to 1996. Mr. Liscombe also was
Chairman of the Board of Trustees of the Bank from 1994 to 1996. He continues to
serve as a trustee of the Mutual Company and currently serves on the Mutual
Company's Audit Committee. Mr. Liscombe is a self-employed certified public
accountant and is active in several civic and charitable organizations.
Robert A. Matson has served as a trustee of the Bank since 1997 and
continues to serve on the Board of Directors of the Bank. He also is a member of
the Board of Trustees of the Mutual Company. Mr. Matson is self-employed as a
chartered financial consultant and chartered life underwriter. He is involved in
civic and charitable organizations.
James W. Murphy has served as a trustee of the Bank since 1979 and
served as Clerk of the Bank since 1992. Mr. Murphy continues to serve as a
trustee of the Mutual Company. Mr. Murphy is an insurance broker for D.L. Murphy
Insurance of Millis, Massachusetts.
Lawrence E. Novick has served as a trustee of the Bank since 1992,
where he also served on the Board of Investment (since 1996) and on the Audit
Committee (from 1993 to 1996). Mr. Novick continues to serve as a trustee of the
Mutual Company and a director of the Bank. He is a self-employed tax and
financial services advisor in Holliston, Massachusetts. Mr. Novick is involved
in many trade organizations and holds positions in civic and charitable
organizations.
Eugene G. Stone has served as a trustee of the Bank since 1988 and
continues to serve as a trustee of the Mutual Company and a director of the
Bank. He has been President and Chief Executive Officer of the Bank since 1988
and Chairman of the Bank since 1997. Mr. Stone serves on the boards of several
civic and charitable organizations.
Executive Officers of the Stock Company Who Are Not Directors
Warren W. Chase, Jr. has served as Vice President and Treasurer of the
Bank since 1995. Prior to joining the Bank, Mr. Chase, a certified public
accountant, worked for 17 years for Sterling Bank, Waltham, Massachusetts
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as Controller and Vice President of Financial Planning. His principal areas of
responsibility for the Bank include financial reporting, financial planning and
liquidity management.
Michael A. Dalrymple has been employed by the Bank since 1988,
initially as the Bank's Senior Loan Officer and currently as Vice President of
Residential and Consumer Lending.
Kevin H. Kane joined the Bank in 1998 as a Vice President and Senior
Commercial Loan Officer. Mr. Kane has over 20 years of experience in commercial
lending, commercial credit and financial management. Prior to joining the Bank,
he was a Vice President of Flagship Bank and Trust Company of Worcester,
Massachusetts.
John J. Mogan, Jr. is currently Vice President of Commercial Lending
and has served in that capacity for the Bank since 1990.
Pamela J. Mozynski has been employed by the Bank since 1992 and
currently serves as Vice President of Retail Banking. She is responsible for
branch administration, management of the Summit Club (a banking club for
customers age 50 and over) and all training for branch personnel. She is also
responsible for Bank security and compliance.
Daniel G. Trombley has been employed by the Bank since 1995 and
currently serves as Vice President responsible for all deposit and loan
servicing operations, systems and data processing operations. Prior to 1995, Mr.
Trombley was a Senior Vice President of Quincy Savings Bank, Quincy,
Massachusetts.
Meetings and Committees of the Board of the Bank
The Board of Directors of the Bank meets bi-weekly and may have
additional special meetings as may be called by the Chairman or as otherwise
provided by law. During the year ended June 30, 1997, the Board held 14
meetings. No director attended fewer than 75% in the aggregate of the total
number of meetings of the Board or Board committees on which such director
served for the year ended June 30, 1997. The Board of Directors of the Bank has
the following standing committees of the Board of Directors: Audit Committee and
CRA Committee.
Compensation of Directors
Directors of the Bank receive fees of $325 for each meeting attended.
Directors of the Stock Company and Trustees of the Mutual Company are paid an
annual retainer of $1,000 for their services on these Boards. Members of
committees of the Board are paid a fee of $50.
Subsequent to the consummation of the reorganization and Offering, it
is expected that the level and structure of compensation paid to the Boards of
Directors of the Stock Company and the Bank and committees of such Boards will
be reviewed in light of the levels and structure of compensation paid to Boards
of Directors and committees of similarly-situated publicly traded financial
institutions. After such review, the amount of compensation paid to Board and
committee members may be adjusted.
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Executive Compensation
Summary Compensation Table. The following table sets forth the cash
compensation paid by the Bank as well as certain other compensation paid or
accrued for services rendered in all capacities during the year ended June 30,
1997 to the Chief Executive Officer of the Bank. No other executive officers of
the Bank received total annual compensation in excess of $100,000.
<TABLE>
<CAPTION>
Long-term compensation
----------------------
Annual compensation Awards Payout
------------------- ------ ------
Other Restricted Options/
annual stock SARS All
Name and compensation awards (#) LTIP other
principal position Salary Bonus (2) (3) (4) payouts compensation
- -------------------------- ----------- ---------- -------------- ------------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Eugene G. Stone $115,544 $300 -- -- -- -- --
President and Chief
Executive Officer
</TABLE>
(1) In accordance with the rules on executive officer and director compensation
disclosure adopted by the SEC, Summary Compensation information is excluded
for the years ended June 30, 1996 and 1995, as the Bank was not a public
company during such periods.
(2) The Bank also provides certain members of senior management with the use of
an automobile, club membership dues and certain other personal benefits,
the aggregate value of which did not exceed the lesser of $50,000 or 10% of
the total annual salary and bonus reported for each officer.
(3) Does not include potential awards pursuant to the Recognition Plan, as such
awards were not earned or granted in 1997. For a discussion of the terms of
such plans which are intended to be adopted by the Stock Company, see
"--Compensation of Officers and Trustees through Benefit Plans--Stock Award
Plan."
(4) No stock options or SARs were earned or granted in 1997. For a discussion
of the Stock Option Plan which is intended to be adopted by the Stock
Company, see "--Compensation of Officers and Trustees through Benefit
Plans--Stock Option Plan."
Supplemental Executive Retirement Plan. In January 1992 the Bank
entered into an agreement with Eugene G. Stone, the Bank's President and Chief
Executive Officer, which established a nonqualified supplemental executive
retirement program ("SERP") for Mr. Stone. The SERP provides for an annual
benefit of $35,375 following Mr. Stone's termination of service due to
retirement on or after age 65. The annual benefit is adjusted and reduced
accordingly for payment following Mr. Stone's death, disability or termination
of service prior to normal retirement or upon early retirement. Benefits are
payable monthly to Mr. Stone or, in the case of his death, to his beneficiary,
over a period of 15 years, unless an optional form of payment available under
the Bank's pension plan is elected. Payment of benefits commence upon death,
early or normal retirement. In the event of disability, payment of benefits
commence the later of age 65 or the termination of other disability benefits. If
Mr. Stone's employment is terminated for reasons other than death, disability,
or retirement, benefit payments begin at age 65. Benefits under the SERP are
forfeited if Mr. Stone's service is terminated for cause. The Bank has
established a rabbi trust and has made contributions to the trust sufficient to
fully satisfy its benefit obligation under the SERP, however, for tax and ERISA
purposes, the SERP is considered an unfunded plan.
Deferred Compensation Plan. In November 1991 the Bank adopted a
deferred compensation plan ("DCP") for the benefit of trustees who serve the
Bank in an employment capacity. The DCP provides each trustee with the
opportunity to defer up to 100% of their salary or fees into the DCP. In the
event of a trustee's termination of employment, amounts credited to his account
under the DCP will be paid to him in the form of lump sum or monthly, quarterly,
semi-annual or annual cash installments in the discretion of the Bank beginning
not later than 30 days following the last day of the month of termination, or
within a reasonable period of time. In the event of death, amounts under the DCP
will be paid to the trustee's designated beneficiaries. Benefits under the DCP
are forfeited if the trustee is terminated for cause. The DCP is an unfunded
plan for tax purposes and for purposes of ERISA. All obligations arising under
the DCP are payable from the general assets of the Bank.
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Employment and Severance Agreements
Employment Agreements. The Bank intends to enter into an employment
agreement with Mr. Stone. The agreement has a term of 36 months. On each
anniversary date, the agreement may be extended for an additional twelve months,
so that the remaining term shall be 36 months. If the agreement is not renewed,
the agreement will expire 36 months following the anniversary date. Under the
agreement, the current Base Salary for Mr. Stone (as defined in the agreement)
is $147,800. The Base Salary may be increased but not decreased. In addition to
the Base Salary, the agreement provides for, among other things, participation
in retirement plans and other employee and fringe benefits applicable to
executive personnel. The agreement provides for termination by the Bank for
cause at any time. In the event the Bank terminates the executive's employment
for reasons other than disability, retirement, or for cause, or in the event of
the executive's resignation from the Bank (such resignation to occur within the
period or periods set forth in the employment agreement) upon (i) failure to
re-elect the executive to his current offices, (ii) a material change in the
executive's functions, duties or responsibilities, or relocation of his
principal place of employment by more than 30 miles, (iii) liquidation or
dissolution of the Bank or the Stock Company, (iv) a breach of the agreement by
the Bank, or (v) following a change in control of the Bank or the Stock Company,
the executive, or in the event of death, his beneficiary, would be entitled to
severance pay in an amount equal to three times the Base Salary and the highest
bonus paid during any of the last three years. Mr. Stone would receive an
aggregate of $525,900 pursuant to his employment agreement upon a change in
control of the Bank or the Stock Company, based upon his current level of
compensation. The Bank would also continue the executive's life, health, dental
and disability coverage for 36 months from the date of termination. In the event
the payments to the executive would include an "excess parachute payment" as
defined by Code Section 280G (relating to payments made in connection with a
change in control), the payments would be reduced in order to avoid having an
excess parachute payment.
Under the agreement, the executive's employment may be terminated upon
his retirement in accordance with any retirement policy established on behalf of
the executive and with his consent. Upon the executive's retirement, he will be
entitled to all benefits available to him under any retirement or other benefit
plan maintained by the Bank. In the event of the executive's disability for a
period of six months, the Bank may terminate the agreement provided that the
Bank will be obligated to pay him his Base Salary for the remaining term of the
agreement or one year, whichever is longer, reduced by any benefits paid to the
executive pursuant to any disability insurance policy or similar arrangement
maintained by the Bank. In the event of the executive's death, the Bank will pay
his Base Salary to his named beneficiaries for one year following his death, and
will also continue medical, dental, and other benefits to his family for one
year. The employment agreement provides that, following his termination of
employment, the executive will not compete with the Bank for a period of one
year.
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Compensation of Officers and Trustees through Benefit Plans
The Bank's current tax-qualified employee pension benefit plans consist
of a defined benefit pension plan and a profit sharing plan with a salary
deferral feature under section 401(k) of the Code. As a result of the
reorganization, the Stock Company and the Bank will be able to compensate
employees with stock-based compensation pursuant to the ESOP, the Recognition
Plan and the Stock Option Plan described below.
Medical, Dental, Life and Other Similar Employee Benefit Plans. The
Bank provides eligible employees (i.e., generally full-time employees) with
group life (after six months of employment), business travel/accident insurance,
short term disability coverage, and long term disability coverage. For its
eligible employees, the Bank pays 60% of the monthly premiums for group health
coverage and 60% of the monthly premiums for individual and family dental
coverage. The Bank pays 100% of the monthly premiums for group life insurance
coverage.
Defined Benefit Pension Plan. The Bank maintains the Savings Banks
Employees Retirement Association Pension Plan, which is a qualified, tax-exempt
defined benefit plan ("Retirement Plan"). All employees age 21 or older who have
worked at the Bank for a period of one year and have been credited with 1,000 or
more hours of service with the Bank during the year are eligible to accrue
benefits under the Retirement Plan. The Bank annually contributes an amount to
the Retirement Plan necessary to satisfy the actuarially determined minimum
funding requirements in accordance with the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
At the normal retirement age of 65, the plan is designed to provide a
single life annuity. For a married participant, the normal form of benefit is a
qualified joint and survivor annuity where, upon the participant's death, the
participant's spouse is entitled to receive a benefit equal to 100% of that paid
during the participant's lifetime. The joint and survivor annuity will be
actuarially equivalent to the single life annuity. The retirement benefit
provided is an amount equal to 1.25% of a participant's average compensation for
each year of service (up to a maximum of 25 years) plus .6% of such average
compensation in excess of covered compensation (as defined in the Retirement
Plan) for each year of service (up to a maximum of 25 years). Retirement
benefits are also payable upon retirement due to early and late retirement,
disability or death. A reduced benefit is payable upon early retirement at age
62, at or after age 55 and the completion of ten years of service with the Bank,
or at age 50 and the completion of 15 years of service. Upon termination of
employment other than as specified above, a participant who was employed by the
Bank for a minimum of three years is eligible to receive his or her accrued
benefit commencing, generally, as soon as administratively possible, following
termination. Benefits under the Retirement Plan are payable in various annuity
forms as well as in the form of a lump sum payment. As of March 31, 1998, the
most recent date for which information is available, the market value of the
Retirement Plan assets equaled $385.6 million.
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The following table indicates the annual retirement benefit that would
be payable under the Retirement Plan upon retirement at age 65 in calendar year
1998, expressed in the form of a single life annuity for the final average
salary and benefit service classifications specified below.
Years of service and benefit payable at retirement
Final --------------------------------------------------
average 25 years
compensation 10 15 20 and after (2)
- ------------ -------- -------- -------- -------------
$ 50,000 $ 6,250 $ 9,375 $ 12,500 $ 15,625
100,000 16,742 25,113 33,484 41,854
150,000 25,992 38,988 51,984 64,979
160,000 (1) 27,842 41,763 55,684 69,604
- ------------
(1) Under present law, a retirement benefit cannot be funded based on
compensation in excess of $160,000. Prior to 1994, retirement benefits
could be funded based on compensation of up to $235,840. If a participant
had accrued a larger retirement benefit based on the law before 1994, the
participant would be entitled to the larger benefit.
(2) Benefits under the Retirement Plan are calculated based on a participant's
average compensation for each year of service, up to 25 years. Benefits do
not increase due to years of service in excess of 25.
At December 31, 1997, Mr. Stone had approximately nine years of credited
service (i.e., benefit service) under the Retirement Plan.
401(k) Plan. The Bank maintains the Savings Banks Employees Retirement
Association 401(k) Plan which is a qualified, tax-exempt profit sharing plan
with a salary deferral feature under Section 401(k) of the Code (the "401(k)
Plan"). All employees who have attained age 21 and have completed one year of
service during which they worked at least 1,000 hours are eligible to
participate.
Under the 401(k) Plan, participants are permitted to make salary
reduction contributions equal to the lesser of 15% of compensation or $10,000
(as indexed annually). For these purposes, "compensation" includes wages
reported on federal income tax form W-2 and includes any amount contributed by
salary reduction to a cafeteria plan or 401(k) plan, but does not include
compensation in excess of the Code Section 401(a)(17) limits (i.e., $160,000 for
plan years beginning in 1997). The Bank will match 50% of the participant's
salary reduction contributions to the 401(k) Plan (up to 6% of the participant's
compensation). All employee contributions, matching contributions and earnings
thereon are fully and immediately vested. A participant may withdraw salary
reduction contributions in the event the participant suffers a financial
hardship. A participant may also borrow money from their account, which loan may
not exceed the lesser of $50,000 or 50% of the participant's total account
balance. The 401(k) Plan permits employees to direct the investment of their own
accounts into various investment options.
Plan benefits will be paid to each participant in the form of a life
annuity (or joint and survivor annuity if married) upon retirement or death
unless an alternate form of distribution (lump sum, life annuity or equal
payments over a fixed period) is selected. If a participant terminates
employment prior to retirement, his vested benefit will be held by the 401(k)
Plan until the participant elects to receive his benefit from the 401(k) Plan.
Normal retirement age under the 401(k) Plan is age 65. Early retirement age is
59 1/2.
Employee Stock Ownership Plan and Trust. The Bank intends to implement
an Employee Stock Ownership Plan in connection with the reorganization and
Offering. Employees with at least one year of employment with the Bank and who
have attained age 21 are eligible to participate. As part of the reorganization
and Offering, the ESOP intends to borrow funds from the Company and use those
funds to purchase a number of shares equal to up to 8% of the common stock to be
issued in the Offering. Collateral for the loan will be the common stock
purchased by the ESOP. The loan will be repaid principally from the Bank's
discretionary contributions to the ESOP. It is anticipated that the interest
rate for the loan either will be indexed to the prime rate published in The Wall
Street Journal ("Prime Rate") from time to time, or will be a fixed rate loan
set at the Prime Rate on the date of closing of the Offering.
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Shares purchased by the ESOP will be held in a suspense account for allocation
among participants as the loan is repaid.
Contributions to the ESOP and shares released from the suspense account
in an amount proportional to the repayment of the ESOP loan will be allocated
among ESOP participants on the basis of compensation in the year of allocation.
Participants in the ESOP will receive credit for each year of service with the
Bank after age 18 prior to the effective date of the ESOP. A participant will
vest in 100% of his or her account balance after 5 years of service or upon
normal or early retirement (as defined in the ESOP), disability or death of the
participant or a change in control (as defined in the ESOP). A participant who
terminates employment for reasons other than death, retirement or disability
prior to five years of service will forfeit the nonvested portion of his
benefits under the ESOP. Benefits will be payable, at the election of the
participant, in the form of common stock only, cash only or common stock and
cash upon death, retirement, early retirement, disability or separation from
service. The Bank's contributions to the ESOP are discretionary, subject to the
loan terms and tax law limits and, therefore, benefits payable under the ESOP
cannot be estimated. The Bank is required to record compensation expense in an
amount equal to the fair market value of the shares committed to be released
from the suspense account.
The Bank will establish a committee to administer the ESOP. The Bank
will either appoint its non-employee directors or an independent financial
institution to serve as trustee of the ESOP. The ESOP committee may instruct the
trustee regarding investment of funds contributed to the ESOP. The ESOP trustee,
subject to its fiduciary duty, must vote all allocated shares held in the ESOP
in accordance with the instructions of participating employees. Under the ESOP,
nondirected shares and shares held in the suspense account will be voted in a
manner calculated to most accurately reflect the instructions it has received
from participants regarding the allocated stock so long as such vote is in
accordance with the provisions of ERISA.
Stock Option Plan. At a meeting of the Stock Company's shareholders to
be held no earlier than six months after the completion of the Offering, the
Board of Directors intends to submit for shareholder approval the Stock Option
Plan for directors and officers of the Bank and of the Stock Company. The Stock
Company's current intention is to implement the Stock Option Plan one year after
completion of the Offering. If approved by the shareholders and by the Division,
common stock in an aggregate amount equal to 10% of the shares issued in the
Offering would be reserved for issuance by the Stock Company upon the exercise
of the stock options granted under the Stock Option Plan. Ten percent of the
shares issued in the Offering would amount to 79,900 shares, 94,000 shares,
108,100 shares or 124,315 shares at the minimum, mid-point, maximum and 15%
above the maximum of the Offering Range, respectively. No options would be
granted under the Stock Option Plan until the date on which shareholder approval
is received.
The exercise price of the options granted under the Stock Option Plan
will be equal to the fair market value of the shares on the date of grant of the
stock options. If the Stock Option Plan is adopted within one year following the
Offering, options will become exercisable at a rate of 20% at the end of each 12
months of service with the Bank after the date of grant. Options granted under
the Stock Option Plan would be adjusted for capital changes such as stock splits
and stock dividends. Notwithstanding the foregoing, awards will be 100% vested
upon termination of employment due to death or disability, and if the Stock
Option Plan is adopted more than 12 months after the Offering, awards would be
100% vested upon normal retirement or a change in control of the Bank or the
Stock Company. Unless the Stock Company decides to call an earlier special
meeting of shareholders, the date of grant of these options is expected to be
the date of the Stock Company's annual meeting of shareholders to be held at
least six months after the Offering. Under FDIC rules, if the Stock Option Plan
is adopted within the first 12 months after the Offering, no individual officer
may receive more than 25% of the awards under the plan, no non-employee director
may receive more than 5% of the awards under the plan, and all non-employee
directors as a group can receive no more than 30% of the awards under the plan
in the aggregate.
The Stock Option Plan would be administered by a committee of
non-employee members of the Stock Company's Board of Directors. Options granted
under the Stock Option Plan to employees may be "incentive" stock
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options, to the extent permitted under the Code, designed to result in a
beneficial tax treatment to the employee but no tax deduction to the Stock
Company. Non-qualified stock options may also be granted to employees under the
Stock Option Plan, and will be granted to the non-employee directors who receive
stock options. In the event an option recipient terminated his employment or
service as an employee or director, the options would terminate during certain
specified periods.
Recognition and Retention Plan. At a meeting of the Stock Company's
stockholders to be held at least six months after the completion of the
Offering, the Board of Directors also intends to submit a Recognition and
Retention Plan (the "Stock Plan") for stockholder approval. The Stock Company's
current intention is to implement the Stock Plan one year after completion of
the Offering. The Stock Plan will provide the Bank's directors and officers an
ownership interest in the Stock Company in a manner designed to encourage them
to continue their service with the Bank. The Bank will contribute funds to the
Stock Plan from time to time to enable it to acquire an aggregate amount of
common stock equal to up to 4% of the shares of common stock issued in the
Offering or 31,960 shares, 37,600 shares, 43,240 or 49,726 shares at the
minimum, midpoint, maximum and 15% above the maximum of the Offering Range,
respectively. The Stock Plan may acquire the shares either directly from the
Stock Company or in open market purchases. In the event that additional
authorized-but-unissued shares would be acquired by the Stock Plan after the
Offering, the interests of existing stockholders would be diluted. The officers
and directors will be awarded common stock under the Stock Plan without having
to pay cash for the shares. No awards under the Stock Plan would be made until
the date the Stock Plan is approved by the Stock Company's stockholders and by
the Division.
Awards under the Stock Plan would be nontransferable and nonassignable,
and during the lifetime of the recipient could only be earned by him. Under FDIC
rules, if the Stock Plan is adopted within one year following the Offering, the
shares which are subject to an award would vest and be earned by the recipient
at a rate of 20% of the shares awarded at the end of each full 12 months of
service with the Bank after the date of grant of the award. Awards would be
adjusted for capital changes such as stock dividends and stock splits.
Notwithstanding the foregoing, awards would be 100% vested upon termination of
employment or service due to death or disability, and if the Stock Plan is
adopted more than 12 months after the Offering, awards would be 100% vested upon
normal retirement or a change in control of the Bank or the Stock Company. If
employment or service were to terminate for other reasons, the award recipient
would forfeit any nonvested award. If employment or service is terminated for
cause (as defined in the Stock Plan), shares not already delivered under the
Stock Plan would be forfeited. Under FDIC rules, if the Stock Plan is adopted
within 12 months after the Offering, no individual officer may receive more than
25% of the awards under the plan, no non-employee trustee may receive more than
5% of the awards under the plan, and all non-employee trustees as a group may
receive no more than 30% of the awards under the plan in the aggregate.
When shares become vested under the Stock Plan, the participant will
recognize income equal to the fair market value of the Common Stock earned,
determined as of the date of vesting, unless the recipient makes an election
under ss. 83(b) of the Code to be taxed earlier. The amount of income recognized
by the participant would be a deductible expense for tax purposes for the Stock
Company. If the Stock Plan is adopted within one year following the Offering,
dividends and other earnings will accrue and be payable to the award recipient
when the shares vest. If the Stock Plan is adopted within one year following the
Offering, shares not yet vested under the Stock Plan will be voted by the
trustee of the Stock Plan, taking into account the best interests of the
recipients of the Stock Plan awards. If the Stock Plan is adopted more than one
year following the Offering, dividends declared on unvested shares will be
distributed to the participant when paid, and the participant will be entitled
to vote the unvested shares.
Indebtedness of Management
The Bank makes loans to non-officer trustees and directors. Such loans
are made on the same terms and conditions as those of comparable transactions
with the general public and do not present more than the normal risk of
collectibility.
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Transactions With Certain Related Persons
The Bank offers to directors, officers, and employees real estate
mortgage loans secured by their principal residence. All loans to the Bank's
directors, officers and employees are made on substantially the same terms,
including interest rates and collateral as those prevailing at the time for
comparable transactions, and do not involve more than minimal risk of
collectibility.
RESTRICTIONS ON ACQUISITION OF THE STOCK COMPANY AND THE BANK
Although the Board of Directors of the Bank and the Stock Company are
not aware of any effort that might be made to obtain control of the Stock
Company following the reorganization and Offering, the Board of Directors, as
discussed below, believes that it is appropriate to include certain provisions
in the Stock Company's Articles of Organization and Bylaws to protect the
interests of the Stock Company and its stockholders from takeovers which the
Board of Directors of the Stock Company might conclude are not in the best
interest of the Bank, the Stock Company, or the Stock Company's stockholders.
Even though the Mutual Company will own a minimum of 51% of the common stock,
and may, therefore, prevent any takeover proposal simply by voting its stock
against any such a proposal, the Mutual Company may convert to the stock form of
ownership in the future, although it has no present intention to do so.
Accordingly, the Stock Company is not assured that the Mutual Company will
always control the Stock Company by virtue of its ownership of the majority of
the Common Stock. In addition, these provisions will increase protections
available to the Stock Company against transactions that, although not resulting
in an acquisition of a majority of the Stock Company's stock, nevertheless may
harm the Stock Company and its stockholders by disrupting the Bank's operations
and management, and by causing the Stock Company to incur substantial expenses.
The following discussion is a general summary of the material
provisions of the Stock Company's Articles of Organization and Bylaws and
certain other regulatory provisions which may be deemed to have an
"anti-takeover" effect. The following description of certain of these provisions
is necessarily general and, with respect to provisions contained in the Stock
Company's Articles of Organization and Bylaws and the Bank's Charter and Bylaws,
reference should be made in each case to the document in question, each of which
is part of the Bank's application to the Commissioner and the Stock Company's
Registration Statement filed with the SEC. See "Additional Information."
Provisions of the Stock Company's Articles of Organization and Bylaws
Directors. Certain provisions of the Stock Company's Articles of
Organization and Bylaws will impede changes in control of the Board of
Directors. The Stock Company's Bylaws provide that the Board of Directors of the
Stock Company will be divided into three classes, with directors in each class
elected for three-year staggered terms except for the initial directors. Thus,
it would take two annual elections to replace a majority of the Stock Company's
Board. The Stock Company's Articles of Organization provide that the size of the
Board of Directors may be increased or decreased only by a majority vote of the
Board. The Articles of Organization also provide that any vacancy occurring in
the Board of Directors, including a vacancy created by an increase in the number
of directors, shall be filled for the remainder of the unexpired term by a
majority vote of the directors then in office. Finally, the Articles of
Organization and Bylaws impose certain notice and information requirements in
connection with the nomination by stockholders of candidates for election to the
Board of Directors or the proposal by stockholders of business to be acted upon
at an annual meeting of stockholders.
The Articles of Organization provide that a director may only be
removed for cause by the affirmative vote of 80% of the shares eligible to vote.
Removal for "cause" is limited to the grounds for termination in the federal
regulations that apply to employment contracts of federally insured savings
institutions.
Restrictions on Call of Special Meetings. The Articles of Organization
provide that a special meeting of stockholders may be called by a majority of
the authorized Board of Directors of the Stock Company or pursuant to a
resolution adopted by a majority of the Board of Directors. Stockholders are not
authorized to call a special meeting of stockholders.
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Absence of Cumulative Voting. The Articles of Organization provide that
there shall be no cumulative voting for the election of directors.
Authorization of Preferred Stock. The Articles of Organization of the
Stock Company authorize 2,000,000 shares of serial preferred stock, par value
$0.01 per share. The Stock Company is authorized to issue preferred stock from
time to time in one or more series subject to applicable provisions of law, and
the Board of Directors is authorized to fix the designations, and relative
preferences, limitations, voting rights, if any, including without limitation,
offering rights of such shares (which could be multiple or as a separate class).
In the event of a proposed merger, tender offer or other attempt to gain control
of the Stock Company that the Board of Directors does not approve, it might be
possible for the Board of Directors to authorize the issuance of a series of
preferred stock with rights and preferences that would impede the completion of
such a transaction. An effect of the possible issuance of Preferred Stock,
therefore, may be to deter a future takeover attempt. The Board of Directors has
no present plan or understanding to issue any preferred stock.
Other Control Considerations. The Articles of Organization further
provide that the Board of Directors of the Stock Company, when determining
whether the interests of the Stock Company and its stockholders will be served
by any (i) exchange or tender offer, (ii) merger or consolidation or (iii) sale
of substantially all of the assets of the Stock Company, may consider the
interests of the Stock Company's employees, suppliers, creditors and customers,
the economy of the state, region and nation, community and societal
considerations and the long-term and short-term interests of the Stock Company
and its stockholders, including the possibility that these interests will be
best served by the continued independence of the Stock Company.
Procedures for Certain Business Combinations. The Articles of
Organization require that certain business combinations between the Stock
Company (or any majority-owned subsidiary thereof) and a 10% or greater
stockholder either (i) be approved by at least 80% of the total number of
outstanding voting shares of the Stock Company or (ii) be approved by a majority
of certain directors unaffiliated with such 10% or greater stockholder or (iii)
involve consideration per share generally equal to the higher of (A) the highest
amount paid by such 10% stockholder or its affiliates in acquiring any shares of
the Common Stock or (B) the "Fair Market Value" (generally, the highest closing
bid paid on the Common Stock during the 30 days preceding the date of the
announcement of the proposed business combination or on the date the 10% or
greater stockholder became such, whichever is higher).
Amendment to Articles of Organization and Bylaws. The Articles of
Organization may be amended by the affirmative vote of at least 80% of the total
votes eligible to be cast by stockholders; provided, however, that if at least
two-thirds of the Directors then in office recommend approval of an amendment,
then such amendment shall require the affirmative vote of a majority of the
total votes eligible to be cast by stockholders.
The bylaws may be amended by the affirmative vote of the total number
of directors of the Stock Company or the affirmative vote of at least 80% of the
total votes eligible to be voted at a duly constituted meeting of stockholders.
Purpose and Takeover Defensive Effects of the Stock Company's Articles
of Organization and Bylaws. At least 51% of the Common Stock of the Stock
Company will be controlled by the Mutual Company. Moreover, management believes
that under current policy of the FDIC and other regulators, the Mutual Company
could not be acquired without first converting the Mutual Company to stock form.
As a result, it is very unlikely that the Stock Company could be acquired so
long as it is in a mutual holding company structure. Notwithstanding the
foregoing, the Mutual Company may convert to stock form in the future and the
Board of Directors believes that the provisions described above are prudent and
will reduce the Stock Company's vulnerability to takeover attempts and certain
other transactions which have not been negotiated with and approved by its Board
of Directors. These provisions will also assist the Stock Company and the Bank
in the orderly deployment of the Offering proceeds into productive assets during
the initial period after the Offering. The Board of Directors believes these
provisions are in the best interests of the Bank, the Stock Company and its
stockholders. Attempts to acquire control of financial institutions and their
holding companies have become increasingly common. Takeover attempts which have
not been negotiated with and
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approved by the Board of Directors present to stockholders the risk of a
takeover on terms which may be less favorable than might otherwise be available.
A transaction which is negotiated and approved by the Board of Directors, on the
other hand, can be carefully planned and undertaken at an opportune time in
order to obtain maximum value for the Stock Company and its stockholders, with
due consideration given to matters such as the management and business of the
acquiring corporation and maximum strategic development of the Stock Company's
assets.
An unsolicited takeover proposal can seriously disrupt the business and
management of a corporation and cause it great expense. Although a tender offer
or other takeover attempt may be made at a price substantially above
then-current market prices, such offers are sometimes made for less than all of
the outstanding shares of a target company. As a result, stockholders may be
presented with the alternative of partially liquidating their investment at a
time that may be disadvantageous or retaining their investment in an enterprise
which is under different management and the objectives of which may not be
similar to those of the remaining stockholders.
Potential Anti-Takeover Effects. Despite the belief of the Bank and the
Stock Company as to the benefits to stockholders of these provisions of the
Stock Company's Articles of Organization and Bylaws, these provisions, as well
as the mutual holding company structure, will have the effect of discouraging
any takeover attempt which would not be approved either by regulatory policy or
by the Stock Company's Board, but pursuant to which stockholders may receive a
substantial premium for their shares over then-current market prices. As a
result, stockholders who might desire to participate in such a transaction may
not have any opportunity to do so. Such provisions will also make it more
difficult to remove the Stock Company's Board of Directors and management. The
Boards of Directors of the Bank and the Stock Company, however, have concluded
that the potential benefits outweigh the possible disadvantages.
Pursuant to applicable law, at any annual or special meeting of its
stockholders after the Offering, the Stock Company may adopt additional
provisions to its Articles of Organization regarding the acquisition of its
equity securities that would be permitted to a Massachusetts corporation. The
Stock Company and the Bank do not presently intend to propose the adoption of
further restrictions on the acquisition of the Stock Company's equity
securities.
Provisions of the Stock Bank's Charter and Bylaws
Directors. Like the Stock Company's Articles of Organization, the
Bank's Bylaws provides that the Board of Directors of the Bank will be divided
into three classes, with directors in each class elected for three-year
staggered terms except for the initial directors. Thus, it would take two annual
elections to replace a majority of the Bank's Board of Directors. Additionally,
directors of the Bank may only be removed from office for cause and only by the
affirmative vote of the holders of at least 80% of the Bank's outstanding voting
stock, voting together as a single class.
Authorization of Preferred Stock. The Bank's Charter authorizes 500,000
shares of serial preferred stock, par value $1.00 per share. The Bank is
authorized to issue preferred stock from time to time in one or more series
subject to applicable provisions of law, and the Board of Directors is
authorized to fix the designations, and relative preferences, limitations,
voting rights, if any, including without limitation, offering rights of such
shares (which could be multiple or as a separate class). In the event of a
proposed merger, tender offer or other attempt to gain control of the Bank that
the Board of Directors does not approve, it might be possible for the Board of
Directors to authorize the issuance of a series of preferred stock with rights
and preferences that would impede the completion of such a transaction. An
effect of the possible issuance of preferred stock, therefore, may be to deter a
future takeover attempt. The Board of Directors has no present plans of
understanding for the issuance of any preferred stock but it may issue any
preferred stock on terms which the Board deems to be in the best interests of
the Stock Company and its stockholders.
Mutual Holding Company Structure
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Under Massachusetts law, at least 51% of the Stock Company's voting
shares must be owned by the Mutual Company. The Mutual Company is controlled by
its Board of Trustees, and the same persons serving on the Board of Directors of
the Stock Company currently serve on the Board of Trustees of the Mutual
Company. The Mutual Company, acting through its Board of Trustees, will be able
to control the business and operations of the Stock Company and the Bank and
will be able to prevent any challenge to the ownership or control of the Stock
Company by Minority Stockholders.
FRB Regulations
The Change in Bank Control Act and the BHCA, together with the FRB
regulations under those acts, require that the consent of the FRB be obtained
prior to any person or company acquiring "control" of a bank holding company.
Control is conclusively presumed to exist if an individual or company acquires
more than 25% of any class of voting stock of the bank holding company. Control
is rebuttably presumed to exist if the person acquires more than 10% of any
class of voting stock of a bank holding company if either (i) the Stock Company
has registered securities under Section 12 of the Exchange Act or (ii) no other
person will own a greater percentage of that class of voting securities
immediately after the transaction. The regulations provide a procedure to rebut
the rebuttable control presumption. Since the Stock Company's common stock will
be registered under Section 12 of the Exchange Act, any acquisition of 10% or
more of the Stock Company's common stock will give rise to a rebuttable
presumption that the acquiror of such stock controls the Stock Company,
requiring the acquiror, prior to acquiring such stock, to rebut the presumption
of control to the satisfaction of the FRB or obtain FRB approval for the
acquisition of control. Restrictions applicable to the operations of bank
holding companies may deter companies from seeking to obtain control of the
Stock Company. See "Regulation."
Massachusetts Banking Law
Massachusetts banking law also prohibits any "company," defined to
include banking institutions as well as corporations, from directly or
indirectly controlling the voting power of 25% or more of the voting stock of
two or more banking institutions without the prior approval of the Massachusetts
Board of Bank Incorporation. Additionally, an out-of-state company which already
directly or indirectly controls voting power of 25% or more of the voting stock
of two or more banking institutions may not also acquire direct or indirect
ownership or control of more than 5% of the voting stock of a Massachusetts
banking institution without the prior approval of the Board of Bank
Incorporation. Finally, for a period of three years following completion of a
conversion to stock form, no person may directly or indirectly offer to acquire
or acquire beneficial ownership of more than 10% of any class of equity security
of a converting mutual savings bank without prior written approval of the Board
of Bank Incorporation.
DESCRIPTION OF CAPITAL STOCK OF THE STOCK COMPANY
General
The Stock Company is authorized to issue 12 million shares of common
stock having a par value of $.01 per share and 5 million shares of serial
preferred stock having a par value of $.01 per share. The Stock Company
currently expects to issue between 799,000 and 1,081,000 shares, with an
adjusted maximum of 1,243,150 shares, of common stock and no shares of preferred
stock in the Offering. Each share of the common stock will have the same
relative rights as, and will be identical in all respects with, each other share
of the common stock. Upon payment of the purchase price for the common stock, in
accordance with the stock issuance plan, all such stock will be duly authorized,
fully paid, validly issued and non-assessable.
The common stock of the Stock Company will represent nonwithdrawable
capital, will not be an account of an insurable type and will not be insured by
the FDIC or the DIF.
110
<PAGE>
Common Stock
Voting Rights. Under Massachusetts law, the holders of the Stock
Company's common stock will possess exclusive voting power in the Stock Company.
Each stockholder will be entitled to one vote for each share held on all matters
voted upon by stockholders, except as discussed in "Restrictions on Acquisition
of the Stock Company and the Bank." There are no cumulative voting rights in the
election of directors of the Stock Company. If the Stock Company issues
preferred stock subsequent to the Offering, holders of the preferred stock may
also possess voting rights.
Dividends. Upon consummation of the reorganization and the Offering,
the Stock Company's assets will consist of the Bank's common stock and up to 50%
of the net proceeds of the Offering. The payment of dividends by the Stock
Company is subject to limitations which are imposed by law and applicable
regulation. See "Dividends." The holders of common stock will be entitled to
receive and share equally in such dividends as may be declared by the Board of
Directors of the Stock Company out of funds legally available therefor. If the
Stock Company issues preferred stock, the holders thereof may have a priority
over the holders of the common stock with respect to dividends.
Liquidation or Dissolution. In the unlikely event of the liquidation or
dissolution of the Stock Company, the holders of the common stock will be
entitled to receive--after payment or provision for payment of all debts and
liabilities of the Stock Company (including all deposits in the Bank and accrued
interest thereon) and after distribution of the liquidation account established
upon the closing of the reorganization and the Offering for the benefit of
Eligible Account Holders and Supplemental Eligible Account Holders who continue
their deposit accounts at the Bank--all assets of the Stock Company available
for distribution, in cash or in kind. If preferred stock is issued subsequent to
the Offering, the holders thereof may have a priority over the holders of common
stock in the event of liquidation or dissolution.
No Preemptive Rights. Holders of the common stock will not be entitled
to preemptive rights with respect to any shares which may be issued. The common
stock will not be subject to call for redemption and, upon receipt by the Stock
Company of the full purchase price therefor, each share of the common stock will
be fully paid and nonassessable.
Preferred Stock. None of the 5 million authorized shares of preferred
stock of the Stock Company will be issued in the Offering. The Stock Company's
Board of Directors is authorized, without stockholder approval but subject to
applicable regulatory approval, to issue serial preferred stock and to fix and
state voting powers, designations, preferences or other special rights of such
shares. If and when issued, the serial preferred stock may rank senior to the
common stock as to dividend rights, liquidation preferences, or both, and may
have full, limited or no voting rights. Accordingly, the issuance of preferred
stock could adversely affect the voting and other rights of holders of common
stock.
TRANSFER AGENT AND REGISTRAR
_________________________________, will act as the transfer agent and
registrar for the common stock.
LEGAL AND TAX MATTERS
The legality of the common stock and the federal income tax
consequences of the reorganization and the Offering will be passed upon for the
Bank and the Stock Company by Luse Lehman Gorman Pomerenk & Schick, P.C.,
Washington, D.C. The Massachusetts state income tax consequences of the
reorganization and the Offering will be passed upon for the Bank and the Stock
Company by Wolf & Company, P.C., Boston, Massachusetts. Luse Lehman Gorman
Pomerenk & Schick, P.C. and Wolf & Company, P.C. have consented to the
references herein to their opinions. Certain legal matters will be passed upon
for Trident Securities, Inc. by Thacher Profitt & Wood, Washington, D.C.
111
<PAGE>
EXPERTS
The consolidated financial statements as of June 30, 1997 and 1996 and
for each of the two years in the period ended June 30, 1997 appearing in this
prospectus have been audited by Wolf & Company, P.C., independent certified
public accountants, as stated in their reports appearing elsewhere herein, and
have been so included in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
RP Financial, LC. has consented to the publication herein of the
summary of its report to the Bank and the Stock Company setting forth its
opinion as to the estimated pro forma market value of the common stock upon
reorganization and its valuation with respect to subscription rights.
ADDITIONAL INFORMATION
The Stock Company has filed with the SEC a registration statement under
the Securities Act with respect to the common stock offered hereby. As permitted
by the rules and regulations of the SEC, this prospectus does not contain all
the information set forth in the registration statement. Such information can be
examined without charge at the public reference facilities of the SEC located at
450 Fifth Street, NW, Washington, D.C. 20549, and copies of such material can be
obtained from the SEC at prescribed rates. The SEC maintains a web site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC. The address of this web
site is http://www.sec.gov. The statements contained herein as to the contents
of any contract or other document filed as an exhibit to the registration
statement are, of necessity, brief descriptions thereof and are not necessarily
complete but do contain all material information regarding such documents; each
such statement is qualified by reference to such contract or document.
The Bank has filed an Application for Offering with the Division with
respect to the reorganization and Offering. Pursuant to the rules and
regulations of the Division, this prospectus omits certain information contained
in that Application. The Application, including the stock issuance plan and the
Independent Valuation, may be examined at the office of the Division, 100
Cambridge Street, Boston, Massachusetts and at the main office of the Bank at 81
Main Street, Medway, Massachusetts, without charge.
In connection with the Offering, the Stock Company will register its
common stock with the SEC under Section 12(g) of the Exchange Act and, upon such
registration, the Stock Company and the holders of its common stock will become
subject to the proxy solicitation rules, reporting requirements and restrictions
on stock purchases and sales by directors, officers and greater than 10%
stockholders, the annual and periodic reporting and certain other requirements
of the Exchange Act. Under the stock issuance plan, the Stock Company has
undertaken that it will not terminate such registration for a period of at least
three years following the Offering.
A copy of the Articles of Organization and Bylaws of the Stock Company
are available without charge from the Bank by contacting Ms. Laurie Rizzo, Human
Resources Manager, 81 Main Street, Medway, Massachusetts, (508) 533-4343.
112
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
--------
Independent Auditors' Report...................................... F-2
Consolidated Balance Sheets as of March 31, 1998
(Unaudited) and June 30, 1997 and 1996....................... F-3
Consolidated Statements of Income for the Nine Months
Ended March 31, 1998 and 1997 (Unaudited) and the
Years Ended June 30, 1997 and 1996........................... F-4
Consolidated Statements of Changes in Retained Earnings
for the Nine Months Ended March 31, 1998 (Unaudited)
and the Years Ended June 30, 1997 and 1996................... F-5
Consolidated Statements of Cash Flows for the
Nine Months Ended March 31, 1998 and 1997
(Unaudited) and the Years Ended June 30, 1997
and 1996..................................................... F-6 to F-7
Notes to Consolidated Financial Statements........................ F-8 to F-31
The financial statements of Service Bancorp have been omitted because Service
Bancorp has not conducted any business other than of an organizational nature.
All schedules have been omitted either because they are not required, not
applicable, or are included in the notes to consolidated financial statements.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Summit Bank
We have audited the accompanying consolidated balance sheets of Summit Bank,
formerly Medway Savings Bank, and subsidiary as of June 30, 1997 and 1996, and
the related consolidated statements of income, changes in retained earnings and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Bank's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Summit Bank and
subsidiary as of June 30, 1997 and 1996, and the results of their operations and
their cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Wolf & Company, P.C.
WOLF & COMPANY, P.C.
Boston, Massachusetts
August8, 1997, except for Notes 15 and 16
as to which the dates are August 19, 1997
and March 12, 1998, respectively
F-2
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
ASSETS
June 30,
March 31, -----------------------
1998 1997 1996
---- ---- ----
(Unaudited)
Cash and due from banks ................. $ 4,726 $ 2,824 $ 4,495
Short-term investments .................. 6,400 6,305 2,597
--------- --------- ---------
Total cash and cash equivalents ..... 11,126 9,129 7,092
Certificates of deposit (Note 2) ........ 1,500 500 --
Securities available for sale (Note 3) .. 42,685 24,696 20,803
Loans ................................... 72,757 67,409 60,137
Less allowance for loan losses ...... (560) (475) (470)
--------- --------- ---------
Loans, net (Note 4) ..................... 72,197 66,934 59,667
--------- --------- ---------
Other real estate owned ................. -- 37 --
Banking premises and equipment,
net (Note 5) .......................... 1,509 1,402 1,035
Federal Home Loan Bank stock, at cost ... 723 538 454
Accrued interest receivable ............. 993 821 699
Net deferred tax asset (Note 8) ......... 47 201 349
Due from broker ......................... -- 272 --
Other assets ............................ 424 348 255
--------- --------- ---------
$ 131,204 $ 104,878 $ 90,354
========= ========= =========
LIABILITIES AND RETAINED EARNINGS
Deposits (Note 6) ....................... $ 108,056 $ 92,897 $ 81,189
Federal Home Loan Bank advances (Note 7) 12,404 2,622 369
Mortgagors' escrow payments ............. 162 42 69
Other liabilities ....................... 692 622 1,306
--------- --------- ---------
Total liabilities ................. 121,314 96,183 82,933
--------- --------- ---------
Commitments and contingencies (Note 11)
Retained earnings (Note 9) .............. 9,454 8,499 7,417
Net unrealized gain on securities
available for sale, after tax
effects (Notes 3 and 8) ................ 436 196 4
--------- --------- ---------
Total retained earnings ........... 9,890 8,695 7,421
--------- --------- ---------
$ 131,204 $ 104,878 $ 90,354
========= ========= =========
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Years
Ended March 31, Ended June 30,
--------------- ---------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited)
Interest and dividend income:
<S> <C> <C> <C> <C>
Interest and fees on loans ........... $ 4,531 $ 3,923 $ 5,343 $ 4,539
Interest and dividends on
securities available for
sale and Federal Home Loan
Bank stock .......................... 1,564 1,085 1,482 1,341
Interest on short-term investments and
certificates of deposit ............. 214 139 212 222
------- ------- ------- -------
Total interest and dividend income . 6,309 5,147 7,037 6,102
------- ------- ------- -------
Interest expense:
Interest on deposits ............... 2,734 2,238 3,050 2,724
Interest on borrowings ............. 238 86 124 22
------- ------- ------- -------
Total interest expense ............. 2,972 2,324 3,174 2,746
------- ------- ------- -------
Net interest income .................... 3,337 2,823 3,863 3,356
Provision for loan losses (Note 4) ..... 75 35 35 93
------- ------- ------- -------
Net interest income,
after provision for
loan losses ....................... 3,262 2,788 3,828 3,263
------- ------- ------- -------
Other income:
Customer service fees ................ 312 295 406 388
Gain on sales of securities
available for sale, net (Note 3) .... 675 343 462 308
Gain on sales of loans ............... 44 26 31 --
Miscellaneous ........................ 44 46 60 78
------- ------- ------- -------
Total other income ................. 1,075 710 959 774
------- ------- ------- -------
Operating expenses:
Salaries and employee benefits
(Note 10) ........................... 1,439 1,201 1,619 1,385
Occupancy and equipment expenses
(Notes 5 and 11) .................... 627 486 667 574
Data processing expenses ............. 250 198 258 270
Professional fees .................... 116 96 124 124
Advertising expenses ................. 88 45 68 53
Gain on other real estate owned ...... (6) (158) (158) --
Other general and administrative
expenses (Note 14) ................. 347 344 516 329
------- ------- ------- -------
Total operating expenses ........... 2,861 2,212 3,094 2,735
------- ------- ------- -------
Income before income taxes ............. 1,476 1,286 1,693 1,302
Provision for income taxes (Note 8) .... 521 477 611 501
------- ------- ------- -------
Net income ............................. $ 955 $ 809 $ 1,082 $ 801
======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN RETAINED EARNINGS
Nine Months Ended March 31, 1998 (unaudited)
and the Years Ended June 30, 1997 and 1996
(In Thousands)
Net
Unrealized
Gain (Loss)
on Securities
Retained Available
Earnings For Sale Total
-------- -------- -----
Balance at June 30, 1995 ..................... $6,616 $ (15) $6,601
Net income ................................... 801 -- 801
Change in net unrealized gain (loss)
on securities available for sale,
after tax effects ........................ -- 19 19
------ ------ ------
Balance at June 30, 1996 ..................... 7,417 4 7,421
Net income ................................... 1,082 -- 1,082
Change in net unrealized gain (loss)
on securities available for sale,
after tax effects ........................ -- 192 192
------ ------ ------
Balance at June 30, 1997 ..................... 8,499 196 8,695
Net income (unaudited) ....................... 955 -- 955
Change in net unrealized gain (loss)
on securities available for sale,
after tax effects (unaudited) ............ -- 240 240
------ ------ ------
Balance at March 31, 1998 (unaudited) ........ $9,454 $ 436 $9,890
====== ====== ======
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Years
Ended March 31, Ended June 30,
-------------------- --------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited)
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income ............................................ $ 955 $ 809 $ 1,082 $ 801
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for loan losses ..................... 75 35 35 93
Gain on sales of securities available for sale,
net ....................................... (675) (343) (462) (308)
Net amortization of premium on securities
available for sale ........................ 338 31 40 81
Gain on other real estate owned ............... (6) (158) (158) --
Depreciation and amortization expense ......... 259 185 266 196
Increase in accrued interest receivable ....... (172) (116) (123) (65)
Deferred tax provision (benefit) .............. 3 47 31 (60)
Loans originated for sale ..................... (5,379) (1,585) (2,219) (361)
Principal balance of loans sold ............... 5,379 1,585 2,219 361
Other, net .................................... (6) (746) (776) 608
-------- -------- -------- --------
Net cash provided (used) by operating
activities .......................... 771 (256) (65) 1,346
-------- -------- -------- --------
Cash flows from investing activities:
Purchase of certificates of deposit ................... (1,000) -- (500) --
Proceeds from sales of securities available for
sale .............................................. 3,611 4,259 4,388 2,846
Proceeds from maturities of and principal
payments on securities available for sale ......... 7,319 3,764 5,848 9,132
Purchase of securities available for sale ............. (27,919) (8,691) (13,670) (12,638)
Net increase in loans ................................. (5,512) (4,691) (7,568) (11,960)
Capital additions to other real estate owned .......... -- -- -- (97)
Proceeds from other real estate owned ................. 217 387 387 515
Purchase of banking premises and equipment ............ (366) (485) (633) (302)
Purchase of Federal Home Loan Bank stock .............. (185) (84) (84) (22)
-------- -------- -------- --------
Net cash used by investing activities ... (23,835) (5,541) (11,832) (12,526)
-------- -------- -------- --------
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Concluded)
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Years
Ended March 31, Ended June 30,
------------------- ------------------
1998 1997 1997 1996
---- ---- ---- ----
(Unaudited)
Cash flows from financing activities:
<S> <C> <C> <C> <C>
Net increase in deposits ................... 15,159 7,450 11,707 11,629
Net increase (decrease) in mortgagors'
escrow payments ........................ 120 25 (27) (132)
Proceeds from FHLB advances ................ 12,000 2,327 2,327 166
Repayment of FHLB advances ................. (2,218) (55) (73) (68)
-------- -------- -------- --------
Net cash provided by financing
activities ............... 25,061 9,747 13,934 11,595
-------- -------- -------- --------
Net change in cash and cash equivalents ........ 1,997 3,950 2,037 415
Cash and cash equivalents at beginning of
period ..................................... 9,129 7,092 7,092 6,677
-------- -------- -------- --------
Cash and cash equivalents at end of period ..... $ 11,126 $ 11,042 $ 9,129 $ 7,092
======== ======== ======== ========
Supplementary information:
Interest paid .............................. $ 2,931 $ 2,289 $ 3,163 $ 2,743
Income taxes paid .......................... 541 349 613 538
Transfers to other real estate owned ....... 174 229 266 --
Increase (decrease) in due from broker ..... (272) -- 272 --
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and consolidation
The consolidated financial statements include the accounts of Summit Bank
(the "Bank") and its wholly-owned subsidiaries, Medway Securities Corp.,
and, effective during the nine months ended March 31, 1998, Franklin
Village Security Corp., which engage in the purchase and sale of investment
securities. All significant intercompany balances and transactions have
been eliminated in consolidation.
Unaudited interim financial statements
The consolidated financial statements and related notes as of March 31,
1998 and for the nine months ended March 31, 1998 and 1997 are unaudited.
All adjustments, consisting of only normal recurring adjustments, which in
the opinion of management are necessary for fair presentation of the
financial information, have been made.
Business
The Bank provides a variety of financial services to individuals and small
businesses through its five offices in Norfolk County. Its primary deposit
products are savings, checking and term certificate accounts and its
primary lending products are mortgage, consumer and commercial loans.
Use of estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as
of the date of the consolidated balance sheet and reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the
determination of the allowance for loan losses and the valuation of
foreclosed real estate.
Reclassifications
Certain amounts have been reclassified in the 1996 consolidated financial
statements to conform to the 1997 presentation.
F-8
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash equivalents
Cash equivalents include amounts due from banks and short-term investments.
Short-term investments consist primarily of federal funds sold and other
interest-bearing deposits which mature on a daily basis.
Securities available for sale
Securities available for sale are carried at fair value, with unrealized
gains and losses excluded from earnings and reported as a separate
component of retained earnings, net of taxes.
Amortization of premiums and accretion of discounts on debt securities are
computed using a method which approximates the interest method. Gains and
losses on sales are recorded on the trade date and are computed using the
specific identification method.
Loans
The Bank grants mortgage, consumer and commercial loans to its customers. A
substantial portion of the loan portfolio consists of mortgage loans in
Norfolk County. The ability of the Bank's debtors to honor their contracts
is dependent upon the local economy and the local real estate market.
Loans, as reported, have been adjusted by unadvanced construction loans,
the allowance for loan losses, net deferred loan fees and deferred
premium/income.
Income on loans, including impaired loans, is recognized on the simple
interest basis and is not accrued when in the judgment of management the
collectibility of the loan principal or interest becomes doubtful. Loans
delinquent 90 days or more remain on accrual status when the loan-to-value
ratio is less than 80% and the collateral value is sufficient to cover all
amounts due including principal, interest and related expenses.
Net deferred loan fees are amortized over the contractual lives of the
related loans using the interest method. Deferred premium/income is
amortized using a method which approximates the interest method.
F-9
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Allowance for loan losses
The allowance for loan losses is established through a provision for loan
losses charged to earnings and is maintained at a level considered adequate
to provide for reasonably foreseeable loan losses.
The provision and the level of the allowance are evaluated on a regular
basis by management and are based upon management's periodic review of the
collectibility of the loans in light of known and inherent risks in the
nature and volume of the loan portfolio, adverse situations that may affect
the borrower's ability to repay, estimated value of any underlying
collateral and prevailing economic conditions. This evaluation is
inherently subjective as it requires estimates that are susceptible to
significant change. Ultimately, losses may vary from current estimates and
future additions to the allowance may be necessary.
Loan losses are charged against the allowance when management believes the
collectibility of the loan balance is unlikely. Subsequent recoveries, if
any, are credited to the allowance.
A loan is considered impaired when, based on current information and
events, it is probable that the Bank will be unable to collect the
scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. Factors considered by management
in determining impairment include payment status, collateral value, and the
probability of collecting scheduled principal and interest payments when
due. Loans that experience insignificant payment delays and payment
shortfalls generally are not classified as impaired. Management determines
the significance of payment delays and payment shortfalls on a case-by-case
basis, taking into consideration all of the circumstances surrounding the
loan and the borrower, including the length of the delay, the reasons for
the delay, the borrower's prior payment record, and the amount of the
shortfall in relation to the principal and interest owed. Impairment is
measured on a loan by loan basis using the fair value of existing
collateral.
Large groups of smaller balance homogeneous loans are collectively
evaluated for impairment. Accordingly, the Bank does not separately
identify individual consumer loans for impairment disclosures.
Other real estate owned
Other real estate owned is held for sale and carried at the lower of cost
or estimated fair value less estimated costs to sell.
F-10
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)
Other real estate owned (concluded)
Other real estate owned is initially recorded at fair value at the date of
foreclosure. Costs relating to the development and improvement of property
are capitalized, whereas costs relating to holding property are expensed.
Valuations are periodically performed by management, and an allowance for
losses is established through a charge to earnings if the carrying value of
a property exceeds its fair value less estimated costs to sell.
Banking premises and equipment
Land is carried at cost. Buildings, leasehold improvements and equipment
are stated at cost less accumulated depreciation and amortization computed
on the straight-line method over the estimated useful lives of the assets
or the expected terms of the leases, if shorter.
It is general practice to charge the cost of maintenance and repairs to
earnings when incurred; major expenditures for betterments are capitalized
and depreciated.
Retirement plan
The Bank accounts for pension plan benefits on the net periodic pension
cost method for financial reporting purposes. This method recognizes the
compensation cost of an employee's pension benefit over the employee's
approximate service period. Pension costs are funded in the year of accrual
using the aggregate cost method.
Income taxes
Deferred tax assets and liabilities are reflected at currently enacted
income tax rates applicable to the period in which the deferred tax assets
or liabilities are expected to be realized or settled. As changes in tax
laws or rates are enacted, deferred tax assets and liabilities are adjusted
accordingly through the provision for income taxes. The Bank's base amount
of its federal income tax reserve for loan losses is a permanent difference
for which there is no recognition of a deferred tax liability. However, the
loan loss allowance maintained for financial reporting purposes is a
temporary difference with allowable recognition of a related deferred tax
asset, if it is deemed realizable.
F-11
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
2. CERTIFICATES OF DEPOSIT
A summary of certificates of deposit follows:
March 31, June 30,
Maturity Date Rate 1998 1997
- ------------- ---- ---- ----
January 8, 1999 ................ 5.8% $1,000 $ --
June 5, 2000 ................... 6.4 500 500
------ ------
$1,500 $ 500
====== ======
3. SECURITIES AVAILABLE FOR SALE
A summary of securities available for sale follows:
March 31, 1998
-------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
Federal agency obligations ....... $ 29,504 $ 214 $ (80) $ 29,638
Mortgage-backed securities ....... 7,300 26 (21) 7,305
Other debt securities ............ 2,503 4 (16) 2,491
-------- -------- -------- --------
Total debt securities ......... 39,307 244 (117) 39,434
Marketable equity securities ..... 2,701 588 (38) 3,251
-------- -------- -------- --------
$ 42,008 $ 832 $ (155) $ 42,685
======== ======== ======== ========
F-12
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
SECURITIES AVAILABLE FOR SALE (continued)
June 30, 1997
--------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
Federal agency obligations ....... $ 16,823 $ 14 $ (195) $ 16,642
Mortgage-backed securities ....... 2,740 19 (14) 2,745
Other debt securities ............ 1,615 5 (7) 1,613
-------- -------- -------- --------
Total debt securities ......... 21,178 38 (216) 21,000
Marketable equity securities ..... 3,232 543 (79) 3,696
-------- -------- -------- --------
$ 24,410 $ 581 $ (295) $ 24,696
======== ======== ======== ========
June 30, 1996
--------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
Federal agency obligations ....... $ 11,024 $ 17 $ (232) $ 10,809
Mortgage-backed securities ....... 2,099 6 (29) 2,076
Other debt securities ............ 5,129 13 (28) 5,114
-------- -------- -------- --------
Total debt securities ......... 18,252 36 (289) 17,999
Marketable equity securities ..... 2,574 270 (40) 2,804
-------- -------- -------- --------
$ 20,826 $ 306 $ (329) $ 20,803
======== ======== ======== ========
F-13
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
SECURITIES AVAILABLE FOR SALE (concluded)
The amortized cost and estimated fair value of debt securities by
contractual maturity at March 31, 1998 and June 30, 1997 follows:
March 31, 1998 June 30, 1997
-------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---- ----- ---- -----
Within 1 year .................. $ 500 $ 499 $ 616 $ 615
Over 1 year to 5 years ......... 3,000 3,006 7,009 6,988
Over 5 years to 10 years ....... 26,507 26,629 9,063 8,926
Over 10 years .................. 2,000 1,995 1,750 1,726
------- ------- ------- -------
32,007 32,129 18,438 18,255
Mortgage-backed
securities ................. 7,300 7,305 2,740 2,745
------- ------- ------- -------
$39,307 $39,434 $21,178 $21,000
======= ======= ======= =======
Proceeds from the sale of securities available for sale for the nine months
ended March 31, 1998 and 1997 were $3,611 and $4,259, respectively. Gross
gains of $680 and $363, and gross losses of $5 and $20, were realized
during the nine months ended March 31, 1998 and 1997, respectively.
Proceeds from the sale of securities available for sale during fiscal 1997
and 1996 were $4,660 and $2,846, respectively. Gross gains of $482 and
$316, and gross losses of $20 and $8, were realized during fiscal 1997 and
1996, respectively.
F-14
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
4. LOANS
A summary of the balances of loans follows:
June 30,
March 31, ----------------------
1998 1997 1996
---- ---- ----
Real estate loans:
Residential fixed rate ................. $ 13,459 $ 13,500 $ 13,219
Residential variable rate .............. 32,273 33,696 29,555
Commercial ............................. 12,148 8,342 5,860
Construction ........................... 5,318 4,493 4,659
-------- -------- --------
63,198 60,031 53,293
Less unadvanced construction loans ..... (1,456) (1,613) (1,505)
-------- -------- --------
61,742 58,418 51,788
-------- -------- --------
Other loans:
Home equity ............................ 5,209 4,574 4,271
Installment ............................ 1,495 1,362 1,128
Commercial ............................. 3,525 2,554 2,695
Passbook secured ....................... 886 596 386
-------- -------- --------
11,115 9,086 8,480
-------- -------- --------
Total loans .................. 72,857 67,504 60,268
Less: Allowance for loan losses ........... (560) (475) (470)
Net deferred loan fees ........... (103) (99) (100)
Deferred (income) premium ........ 3 4 (31)
-------- -------- --------
$ 72,197 $ 66,934 $ 59,667
======== ======== ========
At March 31, 1998 and June 30, 1997 and 1996, mortgage loans serviced for
others amounted to $1,268, $1,948 and $2,157, respectively.
F-15
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
LOANS (concluded)
An analysis of the allowance for loan losses is as follows:
Nine Months Years
Ended March 31, Ended June 30,
--------------- --------------
1998 1997 1997 1996
---- ---- ---- ----
Balance at beginning of period ......... $ 475 $ 470 $ 470 $ 445
Provision for loan losses .............. 75 35 35 93
Recoveries ............................. 21 54 64 20
Charge-offs ............................ (11) (20) (94) (88)
----- ----- ----- -----
Balance at end of period ............... $ 560 $ 539 $ 475 $ 470
===== ===== ===== =====
The following is a summary of the impaired and non-accrual loans:
June 30,
March 31, -------------------
1998 1997 1996
---- ---- ----
Loans with no valuation allowance .......... $ 151 $ 84 $ 474
Loans with a corresponding
valuation allowance .................... 192 136 534
------ ------ ------
Total impaired loans ....................... $ 343 $ 220 $1,008
====== ====== ======
Corresponding valuation allowance
on impaired loans ...................... $ 26 $ 9 $ 70
====== ====== ======
Non-accrual loans .......................... $ 343 $ 193 $ 898
====== ====== ======
Accrued interest receivable on non-
accrual loans .......................... $ 24 $ 8 $ 52
====== ====== ======
No additional funds are committed to be advanced in connection with
impaired loans.
Nine Months Years
Ended March 31, Ended June 30,
--------------- --------------
1998 1997 1997 1996
---- ---- ---- ----
Average recorded investment in
impaired loans ......................... $253 $282 $534 $793
==== ==== ==== ====
Interest income recognized on
impaired loans ......................... $ 7 $ 6 $ 9 $ 34
==== ==== ==== ====
Interest income recognized on
a cash basis on impaired loans ......... $ 7 $ 6 $ 9 $ 33
==== ==== ==== ====
F-16
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
5. BANKING PREMISES AND EQUIPMENT
A summary of the cost and accumulated depreciation and amortization of
banking premises and equipment and their estimated useful lives follows:
March 31, June 30, Estimated
1998 1997 1996 Useful Lives
---- ---- ---- ------------
Banking premises:
Land ........................ $ 113 $ 113 $ 113
Building and leasehold
improvements ............ 1,771 1,547 1,349 1 - 40 years
Equipment ....................... 1,912 1,770 1,335 3 - 10 years
------- ------- -------
3,796 3,430 2,797
Less accumulated depreciation and
amortization ................ (2,287) (2,028) (1,762)
------- ------- -------
$ 1,509 $ 1,402 $ 1,035
======= ======= =======
Depreciation and amortization expense for the nine months ended March 31,
1998 and 1997 and the years ended June 30, 1997 and 1996 amounted to $259,
$185, $266 and $196, respectively.
6. DEPOSITS
A summary of deposit balances by type is as follows:
June 30,
March 31, ---------------------
1998 1997 1996
---- ---- ----
Demand ..................................... $ 10,563 $ 6,686 $ 6,630
NOW ........................................ 16,729 13,672 10,528
Money market deposits ...................... 8,659 8,436 8,006
Regular and other savings .................. 22,318 21,505 20,863
-------- -------- --------
Total non-certificate accounts ........... 58,269 50,299 46,027
-------- -------- --------
Term certificates $100,000 or greater ...... 7,766 7,126 4,618
Term certificates less than $100,000 ....... 42,021 35,472 30,544
-------- -------- --------
Total certificate accounts ............... 49,787 42,598 35,162
-------- -------- --------
Total deposits ........................... $108,056 $ 92,897 $ 81,189
======== ======== ========
F-17
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
DEPOSITS (concluded)
A summary of certificate accounts by maturity is as follows:
March 31, 1998 June 30, 1997 June 30, 1996
------------------ ----------------- --------------
Weighted Weighted Weighted
Average Average Average
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
Within 1 year .......... $42,272 5.70% $35,683 5.60% $27,784 5.65%
Over 1 year to 3 years.. 7,443 5.61 6,915 5.64 7,378 6.00
Over 3 years to 5 years. 72 5.47 -- -- -- --
------- ------- -------
$49,787 5.69% $42,598 5.61% $35,162 5.72%
======= ======= =======
7. FEDERAL HOME LOAN BANK ADVANCES
The following advances were outstanding from the Federal Home Loan Bank of
Boston (FHLB):
Maturity Monthly March 31, June 30,
Date Payment Rate 1998 1997 1996
---- ------- ---- ---- ---- ----
August 19, 1997 ........... $ 9 5.43% $ -- $ 2,000 $ --
December 14, 1998 ......... 5 5.83 1,000 -- --
December 16, 1998 ......... 5 5.84 1,000 -- --
February 18, 1999 ......... 7 4.89 77 133 203
October 29, 1999 .......... 44 5.93 841 -- --
January 8, 2008 (1) ....... 12 4.99 3,000 -- --
February 6, 2008 (1) ...... 25 4.99 6,000 -- --
August 31, 2015 ........... 1 6.84 162 163 166
March 5, 2017 ............. 2 7.06 324 326 --
------- ------- -------
$12,404 $ 2,622 $ 369
======= ======= =======
(1) Callable by the FHLB in 1999.
The advance maturing August 19, 1997 requires interest only payments until
maturity. The advance maturing August 31, 2015 requires a balloon payment
of $96 at maturity. The advance maturing March 5, 2017 requires a balloon
payment of $191 at maturity.
F-18
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
FEDERAL HOME LOAN BANK ADVANCES (concluded)
Total scheduled future principal payments of the advances are as follows:
Year Ending March 31, June 30,
June 30, 1998 1997
--------------- -------------- -----------
1998 $ 142 $ 2,080
1999 2,566 64
2000 224 6
2001 6 6
2002 7 7
Thereafter 9,459 459
-------------- -----------
$ 12,404 $ 2,622
============== ===========
The Bank also has an available line of credit with the FHLB at an interest
rate that adjusts daily. Borrowings under the line are limited to $1,964 at
March 31, 1998 and June 30, 1997.
All borrowings from the FHLB are secured by a blanket lien primarily on
U.S. Government and federal agency obligations and real estate loans in
accordance with the FHLB agreement.
8. INCOME TAXES
Allocation of federal and state income taxes between current and deferred
portions is as follows:
Nine Months Years
Ended March 31, Ended June 30,
--------------- --------------
1998 1997 1997 1996
---- ---- ---- ----
Current tax provision:
Federal ...................... $ 498 $ 361 $ 482 $ 446
State ........................ 20 69 98 115
----- ----- ----- -----
518 430 580 561
----- ----- ----- -----
Deferred tax provision
(benefit):
Federal ...................... 2 35 23 (55)
State ........................ 1 12 8 (5)
----- ----- ----- -----
3 47 31 (60)
----- ----- ----- -----
$ 521 $ 477 $ 611 $ 501
===== ===== ===== =====
F-19
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
INCOME TAXES (continued)
The reasons for the differences between the effective tax rates and the
statutory federal income tax rate are summarized as follows:
<TABLE>
<CAPTION>
Nine Months Ended Years Ended
March 31, June 30,
------------------ -------------------
1998 1997 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Statutory rate ............................. 34.0% 34.0% 34.0% 34.0%
Increase (decrease) resulting from:
State taxes, net of federal tax benefit 0.9 4.2 4.1 5.6
Dividend received deduction ............ (0.8) (1.1) (1.1) (1.5)
Other .................................. 1.2 -- (0.9) 0.4
---- ---- ---- ----
Effective tax rates ........................ 35.3% 37.1% 36.1% 38.5%
==== ==== ==== ====
</TABLE>
The components of the net deferred tax asset are as follows:
June 30,
March 31, --------------------
1998 1997 1996
---- ---- ----
Deferred tax asset:
Federal .......................... $ 317 $ 378 $ 399
State ............................ 109 132 141
----- ----- -----
426 510 540
----- ----- -----
Deferred tax liability:
Federal .......................... (328) (262) (159)
State ............................ (51) (47) (32)
----- ----- -----
(379) (309) (191)
----- ----- -----
Net deferred tax asset ............... $ 47 $ 201 $ 349
===== ===== =====
F-20
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
INCOME TAXES (concluded)
The tax effects of each type of income and expense item that give rise to
deferred taxes are as follows:
June 30,
March 31, -----------------
1998 1997 1996
---- ---- ----
Allowance for loan losses ................... $ 99 $ 66 $ 107
Net unrealized gain/loss on securities
available for sale ...................... (241) (90) 27
Employee benefit plans ...................... 73 98 95
Net deferred loan fees ...................... 51 51 64
Depreciation ................................ 81 79 56
Other ....................................... (16) (3) --
----- ----- -----
Net deferred tax asset ...................... $ 47 $ 201 $ 349
===== ===== =====
A summary of the change in net deferred tax asset is as follows:
Nine Months Years
Ended March 31, Ended June 30,
--------------- --------------
1998 1997 1997 1996
---- ---- ---- ----
Balance at beginning of period .......... $ 201 $ 349 $ 349 $ 286
Deferred tax (provision) benefit ........ (3) (47) (31) 60
Change in deferred tax effect of
net unrealized gain/loss on
securities available for sale ....... (151) 57 (117) 3
----- ----- ----- -----
Balance at end of period ................ $ 47 $ 359 $ 201 $ 349
===== ===== ===== =====
There was no valuation reserve required for the periods presented.
The federal income tax reserve for loan losses at the Bank's base year is
approximately $1,142. If any portion of the reserve is used for purposes
other than to absorb loan losses, approximately 150% of the amount actually
used, limited to the amount of the reserve, would be subject to taxation in
the fiscal year in which used. As the Bank intends to use the reserve
solely to absorb loan losses, a deferred tax liability of approximately
$467 has not been provided.
F-21
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
9. MINIMUM REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Bank's consolidated financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities and certain
off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total and Tier 1
capital (as defined) to risk-weighted assets (as defined) and of Tier 1
capital (as defined) to average assets (as defined). Management believes
that the Bank meets all capital adequacy requirements to which it is
subject.
As of March 31, 1998 and June 30, 1997 and 1996, the most recent
notification from the Federal Deposit Insurance Corporation categorized the
Bank as well capitalized under the regulatory framework for prompt
corrective action. To be categorized as well capitalized, the Bank must
maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage
ratios as set forth in the following table. There are no conditions or
events since that notification that management believes have changed the
Bank's category. The Bank's actual capital amounts and ratios are also
presented in the table.
F-22
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
MINIMUM REGULATORY CAPITAL REQUIREMENTS (concluded)
<TABLE>
<CAPTION>
Minimum
To Be Well
Minimum Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------- ------------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
March 31, 1998:
Total capital
(to risk weighted assets) $ 10,014 14.4% $ 5,567 8.0% $ 6,958 10.0%
Tier 1 capital
(to risk weighted assets) 9,454 13.6 2,783 4.0 4,175 6.0
Tier 1 capital
(to average assets) 9,454 7.8 3,657- 3.0- 6,096 5.0
6,096 5.0
June 30, 1997:
Total capital
(to risk weighted assets) 8,974 15.0 4,791 8.0 5,989 10.0
Tier 1 capital
(to risk weighted assets) 8,499 14.2 2,395 4.0 3,593 6.0
Tier 1 capital
(to average assets) 8,499 8.4 3,046- 3.0- 5,077 5.0
5,077 5.0
June 30, 1996:
Total capital
(to risk weighted assets) 7,887 14.4 4,392 8.0 5,490 10.0
Tier 1 capital
(to risk weighted assets) 7,417 13.5 2,196 4.0 3,294 6.0
Tier 1 capital
(to average assets) 7,417 8.5 3,501- 4.0- 4,376 5.0
4,376 5.0
</TABLE>
F-23
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
10. PENSION AND COMPENSATION PLANS
Defined benefit plan
The Bank provides basic and supplemental pension benefits for eligible
employees through the Savings Banks Employees Retirement Association
("SBERA") Pension Plan. Each employee reaching the age of 21 and having
completed at least 1,000 hours of service in one consecutive twelve-month
period, beginning with such employee's date of employment, automatically
becomes a participant in the retirement plan. All participants are fully
vested after three years of service.
Net periodic pension cost included the following components:
Years Ended October 31,
-----------------------
1997 1996
---- ----
Service cost - benefits earned during the year ......... $ 70 $ 67
Interest cost on projected benefits .................... 36 32
Actual return on plan assets ........................... (71) (60)
Net amortization and deferral .......................... (3) (3)
Amortization of net loss ............................... 27 25
---- ----
$ 59 $ 61
==== ====
Total pension expense for the nine months ended March 31, 1998 and 1997 and
for the years ended June 30, 1997 and 1996 amounted to $53, $45, $60 and
$67, respectively.
According to the SBERA's actuary, the funded status of the plan is as
follows:
October 31,
-----------------
1997 1996
----- -----
Plan assets at fair value .................................. $ 620 $ 473
Actuarial present value of projected benefit obligation
(substantially all vested) ............................. 655 477
----- -----
Projected benefit obligation in excess of plan assets ...... (35) (4)
Unamortized net asset since adoption of SFAS No. 87 ........ (32) (35)
Unrecognized net gain ...................................... (118) (147)
----- -----
Accrued pension cost ....................................... $(185) $(186)
===== =====
The accumulated benefit obligation (substantially all vested) at October
31, 1997 amounted to $397, which was less than the plan assets at fair
value.
F-24
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
PENSION AND COMPENSATION PLANS (concluded)
Defined benefit plan (concluded)
For the plan years ended October 31, 1997 and 1996, actuarial assumptions
used in accounting were:
1997 1996
---- ----
Discount rate on benefit obligations ..................... 7.25% 7.50%
Expected long-term rate of return on plan assets ......... 8.00 8.00
Annual salary increases .................................. 5.00 5.00
401(k) plan
In addition to the defined benefit plans, the Bank provides a savings plan
which qualifies under Section 401(k) of the Internal Revenue Code and
provides for voluntary contributions by participating employees ranging
from one percent to fifteen percent of their compensation, subject to
certain limitations. The Bank will make matching contributions equal to 50%
of each employee's voluntary contribution, up to 3% of the employee's
compensation. Total expense under the plan for the nine months ended March
31, 1998 and 1997 and the years ended June 30, 1997 and 1996 amounted to
$22, $16, $24 and $18, respectively.
Supplemental executive retirement plan
The Bank has supplemental retirement agreements with certain current and
retired officers of the Bank which provide for supplemental compensation
payments upon retirement, subject to certain limitations as set forth in
the agreements. The present value of these future payments amounted to $96,
$75 and $63 at March 31, 1998 and June 30, 1997 and 1996, respectively.
11. COMMITMENTS AND CONTINGENCIES
General
In the ordinary course of business, various legal claims arise from time to
time and, in the opinion of management, these claims will have no material
effect on the Bank's consolidated financial statements.
F-25
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
COMMITMENTS AND CONTINGENCIES (continued)
Loan commitments
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, which
involve elements of credit and interest rate risk in excess of the amount
recognized in the accompanying consolidated balance sheets. The Bank's
exposure to credit loss is represented by the contractual amount of the
instruments. The Bank uses the same credit policies in making commitments
as it does for on-balance-sheet instruments.
Financial instruments whose contract amount represents credit risk consist
of:
June 30,
March 31, ---------------
1998 1997 1996
---- ---- ----
Commitments to grant loans .......................... $5,063 $5,670 $1,679
Unadvanced funds on home equity lines-of-credit ..... 5,069 4,457 4,126
Unadvanced funds on commercial lines-of-credit ...... 1,966 1,347 1,822
Unadvanced funds on personal lines-of-credit ........ 295 213 134
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. The commitments for home equity
lines-of-credit may expire without being drawn upon, therefore, the total
commitment amounts do not necessarily represent future cash requirements.
The Bank evaluates each customer's credit worthiness on a case-by-case
basis. Commitments to grant loans and lines-of-credit are secured by real
estate or other collateral, if deemed necessary.
F-26
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
COMMITMENTS AND CONTINGENCIES (concluded)
Operating lease commitments
Pursuant to the terms of noncancelable lease agreements in effect at March
31, 1998 and June 30, 1997 pertaining to banking premises and equipment,
future minimum rent commitments are as follows:
Year Ending March 31, June 30,
June 30, 1998 1997
--------------- -------------- ------------
1998 $ 56 $ 214
1999 244 224
2000 243 213
2001 208 178
2002 195 164
Thereafter 985 414
-------------- ------------
$ 1,931 $ 1,407
============== ============
Two leases contain an option to extend for two additional five year
periods. The cost of such rentals is not included above. Total rent expense
for nine months ended March 31, 1998 and 1997 and the years ended June 30,
1997 and 1996 amounted to $178, $156, $210 and $184, respectively.
12. RELATED PARTY TRANSACTIONS
Certain of the Bank's trustees and officers and their affiliates are also
customers of the Bank. At March 31, 1998 and June 30, 1997 and 1996, total
loans to such persons amounted to $643, $563 and $655, respectively. The
loans were made in the ordinary course of business at the Bank's normal
credit terms, including interest rate and collateral requirements and do
not represent more than a normal risk of collection.
F-27
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" requires disclosure of estimated fair
values of all financial instruments where it is practicable to estimate
such values. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows.
Accordingly, the derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. Statement No. 107 excludes
certain financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Bank.
The following methods and assumptions were used by the Bank in estimating
fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts of cash and short-term
investments approximate fair values.
Certificates of deposit: The carrying amount of certificates of
deposit approximates fair value.
Securities available for sale: Fair values for securities available
for sale are based on quoted market prices.
FHLB stock: The carrying value of FHLB stock is deemed to approximate
fair value.
Loans: For variable-rate loans that reprice frequently and with no
significant change in credit risk, fair values are based on carrying
values. At June 30, 1996, fair values for residential mortgages are
based on quoted market prices of similar loans sold in conjunction
with securitization transactions, adjusted for differences in loan
characteristics and credit risk. Fair values for other loans,
including residential mortgage loans at March 31, 1998 and June 30,
1997, are estimated using discounted cash flow analyses, using
interest rates currently being offered for loans with similar terms
and adjusted for credit risk. Fair values for non-performing loans are
estimated using discounted cash flow analyses or underlying collateral
values, where applicable.
F-28
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
FAIR VALUE OF FINANCIAL INSTRUMENTS (concluded)
Deposits: The fair values disclosed for non-certificate accounts are,
by definition, equal to the amount payable on demand at the reporting
date (i.e., their carrying amounts). Fair values for fixed-rate
certificates of deposit are estimated using a discounted cash flow
calculation that applies interest rates currently being offered on
certificates to a schedule of aggregated expected monthly maturities
on time deposits.
Federal Home Loan Bank advances: The fair values for the FHLB advances
are estimated using discounted cash flow analyses based on rates
currently in effect for similar types of borrowing arrangements.
Accrued interest: The carrying amounts of accrued interest approximate
fair value.
Off-balance-sheet instruments: Fair values for off-balance-sheet
lending com-mitments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing and are not
material.
The estimated fair values and related carrying amounts of the Bank's
financial instruments are as follows:
<TABLE>
<CAPTION>
June 30,
-----------------------------------------
March 31, 1998 1997 1996
------------------ ------------------ -------------------
Carrying Fair Carrying Fair Carrying Fair
Amount Value Amount Value Amount Value
------ ----- ------ ----- ------ -----
Financial assets:
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents ... $ 11,126 $ 11,126 $ 9,129 $ 9,129 $ 7,092 $ 7,092
Certificates of deposit ..... 1,500 1,500 500 500 -- --
Securities available for sale 42,685 42,685 24,696 24,696 20,803 20,803
FHLB stock .................. 723 723 538 538 454 454
Loans, net .................. 72,197 72,545 66,934 68,070 59,667 60,243
Accrued interest receivable . 993 993 821 821 699 699
Financial liabilities:
Deposits .................... 108,056 108,091 92,897 92,893 81,189 81,258
Federal Home Loan Bank
advances ................ 12,404 12,436 2,622 2,648 369 358
</TABLE>
F-29
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
14. CHARITABLE FOUNDATION
During 1997, the Bank established a private charitable foundation (the
"Foundation") to provide grants and donations to charitable organizations
and various other deserving entities. The Foundation is not a subsidiary of
the Bank and maintains a tax-exempt status. The Foundation was funded by a
donation from the Bank of marketable equity securities with a zero cost
basis and a market value of $53 at the date of the transfer. Such
securities had been classified as available for sale and, accordingly, the
transfer resulted in the Bank recognizing the net unrealized appreciation
of the securities of $53 in the consolidated statement of income.
15. REORGANIZATION
On August 19, 1997, Summit Bank, a Massachusetts-charted mutual savings
bank, was reorganized into a Massachusetts-chartered mutual holding
company, Service Bancorp, MHC ("Corporation") pursuant to Section 2 of
Chapter 167H of the Massachusetts General Laws. Concurrent with the
reorganization, a Massachusetts-chartered stock savings bank was
established as a subsidiary of the Corporation, known as Summit Bank (the
"Bank"). The Corporation exchanged certain of its assets and liabilities,
including all of its deposits, for 100% of the common stock of Summit Bank.
The Bank has continued the operations of the predecessor mutual savings
bank. The transaction has been accounted for as a pooling of interests and
has no effect on the consolidated financial results of the Corporation and
the Bank.
16. PLAN OF CONVERSION (UNAUDITED)
On March 12, 1998, the Board of Trustees of Service Bancorp, MHC voted to
establish Service Bancorp, Inc. (the "Stock Company"), a capital stock
holding company incorporated in Massachusetts. The Bank will become a state
chartered capital stock bank wholly-owned by the Stock Company. In
addition, as part of a Plan of Conversion (the "Plan") the Stock Company
plans to offer for sale 47% of the shares of its common stock (the
"Minority Ownership Interest") in a subscription offering initially to Bank
depositors, employee benefit plans of the Bank and other certain eligible
subscribers ("the Offering"). Any shares of common stock not sold in the
Offering are expected to be sold to members of the general public. After
completion of the Offering, Service Bancorp, MHC will be the 53% owner of
the Stock Company.
F-30
<PAGE>
SUMMIT BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded)
March 31, 1998 and 1997 (Unaudited) and June 30, 1997 and 1996
(Dollars in Thousands)
PLAN OF CONVERSION (UNAUDITED) (concluded)
As part of the Offering, the Bank will establish a liquidation account in
an amount equal to the Minority Ownership Interest multiplied by the net
worth of the Bank as of the date of the latest consolidated balance sheet
appearing in the final prospectus. The liquidation account will be
maintained for the benefit of eligible account holders and supplemental
eligible account holders who maintain their accounts at the Bank after the
Offering. The liquidation account will be reduced annually to the extent
that such account holders have reduced their qualifying deposits as of each
anniversary date. Subsequent increases will not restore an account holder's
interest in the liquidation account. In the event of a complete
liquidation, each eligible account holder will be entitled to receive
balances for accounts then held.
Subsequent to the Offering, the Stock Company and the Bank may not declare
or pay dividends on and the Stock Company may not, repurchase, any of its
shares of common stock if the effect thereof would cause stockholders'
equity to be reduced below applicable regulatory capital maintenance
requirements or if such declaration, payment or repurchase would otherwise
violate regulatory requirements.
Offering costs will be deferred and reduce the proceeds from the shares
sold in the Offering. If the Offering is not completed, all costs will be
expensed. As of March 31, 1998, no offering costs have been incurred. In
addition, as part of the Offering, the Bank intends to enter into
employment agreements with certain executive officers.
F-31
<PAGE>
GLOSSARY
Associate "Associate" of a person means: (i) any corporation
or organization (other than the Bank or its
subsidiaries or the Stock Company) of which such
person is a director, officer, partner or 10%
shareholder; (ii) any trust or other estate in
which such person has a substantial beneficial
interest or serves as trustee or in a similar
fiduciary capacity; provided, however that such
term shall not include any employee stock benefit
plan of the Stock Company or the Bank in which
such a person has a substantial beneficial
interest or as a trustee or in a similar fiduciary
capacity; and (iii) any relative or spouse of such
person, or relative of such spouse, who either has
the same home as such person or who is a director
or officer of the Bank or its subsidiaries or the
Stock Company
Bank Summit Bank, a Massachusetts stock savings bank
BIF The Bank Insurance Fund of the FDIC
Code The Internal Revenue Code of 1986, as amended
Commissioner The Massachusetts Commissioner of Banks
Community Offering The offering for sale to the general public of
shares of common stock not subscribed for in the
Subscription Offering, with preference given to
natural persons residing in the town of Medway,
Massachusetts.
Conversion Transaction A mutual-to-stock conversion of the Mutual Company
DIF The Depositors Insurance Fund
Division The Massachusetts Division of Banks
Eligible Account Holders Depositors of the Bank with aggregate account
balances of at least $50 as of the close of
business on March 31, 1997
ERISA Employee Retirement Income Security Act of 1974,
as amended
ESOP The Service Bancorp, Inc. Employee Stock Ownership
Plan and Trust
Estimated Valuation Range The estimated pro forma market value of the common
stock to be issued in the Offering, or $17,000,000
to $23,000,000. The maximum of the Estimated
Valuation Range may be increased to $26,450,000
without a resolicitation of subscribers
Exchange Act Securities Exchange Act of 1934, as amended
Expiration Date __________, local time, on September __, 1998
FASB Financial Accounting Standards Board
FDIC Federal Deposit Insurance Corporation
FDICIA Federal Deposit Insurance Corporation Improvement
Act of 1991, as amended
G-1
<PAGE>
FHLB The Federal Home Loan Bank
FNMA Federal National Mortgage Association
FRB The Federal Reserve Board
Independent Valuation The appraisal of the pro forma market value of the
Common Stock to be issued in the reorganization
and Offering, as determined by RP Financial, LC.,
Arlington, Virginia
IRA Individual retirement account or arrangement
IRS Internal Revenue Service
Minority Ownership Interest The shares of common stock of the Stock Company
issued in the Offering to persons other than the
Mutual Company.
Minority Stockholders Stockholders of the Stock Company other than the
Mutual Company
MMDA Money Market Demand Account
Mutual Company Service Bancorp, MHC, a Massachusetts mutual
holding company
NASD National Association of Securities Dealers, Inc.
NOW account Negotiable Order of Withdrawal account
NPV Net portfolio value
Offering The offer and sale of between 799,000 and
1,081,000 shares of common stock, subject to
adjustment to 1,243,150 shares of common stock to
depositors and others in the Subscription Offering
and the Community Offering pursuant to this
prospectus
Offering Range The offer and sale by the Stock Company of between
799,000 and 1,081,000 shares (subject to
adjustment to 1,243,150 shares) of common stock in
the Offering pursuant to this prospectus
Order Form The form for ordering common stock accompanied by
a certification concerning certain matters
Qualifying Deposits Deposit accounts with aggregate balances of $50 or
more as of specified dates
Recognition Plan The restricted stock plan to be submitted for
approval at a meeting of the Stock Company's
shareholders to be held no earlier than six months
after the completion of the Offering
REO Real estate owned
SEC Securities and Exchange Commission
G-2
<PAGE>
Stock Company Service Bancorp, Inc., the parent holding company
for Summit Bank, and the issuer of the shares of
common stock in the Offering
Stock Option Plan The stock option plan for directors, trustees,
officers and employees to be submitted for
approval at a meeting of the Stock Company's
shareholders to be held no earlier than six months
after the completion of the Offering
Subscription Offering The offering of nontransferable rights to
subscribe for the common stock, in order of
priority, to Eligible Account Holders,
Supplemental Eligible Account Holders, the Bank's
tax-qualified employee plans, including the ESOP
and employees, officers, directors and trustees of
the Bank and the Mutual Company
Subscription Price The $10.00 price per share at which the common
stock will be sold in the Offering
Supplemental Eligible
Account Holders Depositors of the Bank with aggregate account
balances of at least $50 on June 30, 1998, who are
not Eligible Account Holders
G-3
<PAGE>
- --------------------------------------------------------------------------------
No person has been authorized to give any information or to make any
representation other than as contained in this prospectus and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Service Bancorp, Inc. or Summit Bank. This prospectus does not
constitute an offer to sell or the solicitation of an offer to buy any security
other than the shares of common stock offered hereby to any person in any
jurisdiction in which such offer or solicitation is not authorized, or in which
the person making such offer or solicitation is not qualified to do so, or to
any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this prospectus nor any sale hereunder shall, under any
circumstances, create any implication that information herein is correct as of
any time subsequent to the date hereof.
SERVICE BANCORP, INC.
(Proposed Holding Company for
Summit Bank)
Up to 1,243,150 Shares
Common Stock
($.01 par value per share)
SUBSCRIPTION AND
COMMUNITY OFFERING
PROSPECTUS
TRIDENT SECURITIES, INC.
August __, 1998
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS
AND ARE NOT FEDERALLY INSURED OR GUARANTEED
Until September __, 1998 or 25 days after the commencement of the Offering of
common stock, all dealers effecting transactions in the registered securities,
whether or not participating in this distribution, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Article VI of the Articles of Organization of Service Bancorp, Inc.
(the "Corporation") sets forth circumstances under which directors, officers,
employees and agents of the Corporation may be insured or indemnified against
liability which they incur in their capacities as such.
6.6 Indemnification
A. Each person who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he is or was a Director or an Officer of the
Corporation or is or was serving at the request of the Corporation as a
Director, Officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an "indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a Director, Officer,
employee or agent or in any other capacity while serving as a Director, Officer,
employee or agent, shall be indemnified and held harmless by the Corporation to
the fullest extent authorized by the Massachusetts Business Corporation Law, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than such law permitted the Corporation
to provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid in settlement) reasonably incurred or suffered by such
indemnitee in connection therewith; provided, however, that, except as provided
in Section C hereof with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
B. The right to indemnification conferred in Section A of this Section
6.6 shall include, in the case of a Director or officer at the level of Vice
President or above, and in the case of any other Officer or any employee may
include (in the discretion of the Board of Directors) the right to be paid by
the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition (hereinafter an "advancement of expenses").
Notwithstanding the foregoing, expenses incurred by an indemnitee in advance of
the final disposition of a proceeding may be paid only upon the Corporation's
receipt of an undertaking by the indemnitee to repay such payment if he shall be
adjudicated or determined to be not entitled to indemnification under applicable
law. The Corporation may accept such undertaking without reference to the
financial ability of the Indemnitee to make such repayment. The rights to
indemnification and to the advancement of expenses conferred in Sections A and B
of this Section 6.6 shall be contract rights and such rights shall continue as
to an indemnitee who has ceased to be a Director, Officer, employee or agent and
shall inure to the benefit of the indemnitee's heirs, executors and
administrators.
C. If a claim under Section A or B of this Section 6.6 is not paid in
full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty days, the
indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the indemnitee also shall be
entitled to be paid the expense of prosecuting or defending such suit. In (i)
any suit brought by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking the Corporation shall be entitled to recover such expenses upon a
final adjudication that, he shall not have acted in good faith in the reasonable
belief that his action was in the best interests of the Corporation. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Massachusetts Business Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct, shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an
<PAGE>
advancement of expenses hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Section 6.6 or otherwise, shall be on the
Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Section 6.6 shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, the Corporation's
Charter, Bylaws, agreement, vote of stockholders or disinterested Directors or
otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any Director, Officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Massachusetts Business Corporation Law.
F. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the advancement
of expenses to any employee or agent of the Corporation to the fullest extent of
the provisions of this Section 6.6 with respect to the indemnification and
advancement of expenses of Directors and Officers of the Corporation. Without
limiting the generality of the foregoing, the Corporation may enter into
specific agreements, commitments or arrangements for indemnification on any
terms not prohibited by law which it deems to be appropriate.
G. If the Corporation is merged into or consolidated with another
corporation and the Corporation is not the surviving corporation, the surviving
Corporation shall assume the obligations of the Corporation under this Section
6.6 with respect to any action, suit, proceeding or investigation arising out of
or relating to any actions, transactions or facts occurring at or prior to the
date of such merger or consolidation.
Item 25. Other Expenses of Issuance and Distribution
Amount
------
* Legal Fees........................................ $125,000
* Printing and Mailing.............................. 73,000
* Appraisal and Business Plan Fees and Expenses..... 32,500
* Accounting Fees and Expenses...................... 60,000
** Marketing Fees and Expenses....................... 187,500
* Filing Fees (SEC and Division of Banks of
The Commonwealth of Massachusetts)............. 12,000
* Conversion Agent.................................. 10,000
--------
** Total ............................................ $350,000
========
- ------------
* Estimated
** The Bank and the Company have retained Trident Securities, Inc.
("Trident") to assist in the sale of common stock on a best efforts
basis in the Subscription and Community Offerings. For purposes of
computing estimated expenses, it has been assumed that Trident will
receive fees and expenses of approximately $160,000, exclusive of
attorneys' fees of $27,500.
Item 26. Recent Sales of Unregistered Securities.
Not Applicable.
<PAGE>
Item 27. Exhibits and Financial Statement Schedules:
(a) List of Exhibits
The index of exhibits immediately preecedes the exhibits
attached to this registration statement.
(b) Financial Statement Schedules
No financial statement schedules are filed because the
required information is not applicable or is included in the consolidated
financial statements or related notes.
Item 28. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement;
(iii)To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) To provide to the underwriter at the closing specified in the
underwriting agreements, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the questions whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in Medway,
Massachusetts on July 24, 1998.
SERVICE BANCORP, INC. (in formation)
By: /s/ Eugene G. Stone
-------------------------------------
Eugene G. Stone
President and Chief Executive Officer
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned directors and officers of Service Bancorp, Inc.
(the "Company," and in formation) hereby severally constitute and appoint Eugene
G. Stone, as our true and lawful attorney and agent, to do any and all things in
our names in the capacities indicated below which said Eugene G. Stone may deem
necessary or advisable to enable the Company to comply with the Securities Act
of 1933, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the registration statement on Form SB-2
relating to the offering of the Company's Common Stock, including specifically,
but not limited to, power and authority to sign for us in our names in the
capacities indicated below the registration statement and any and all amendments
(including post-effective amendments) thereto; and we hereby approve, ratify and
confirm all that said Eugene G. Stone shall do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and as of the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ Eugene G. Stone President, Chief Executive July 24, 1998
- --------------------------- Officer and Director (Principal
Eugene G. Stone Executive Officer)
/s/ Warren W. Chase, Jr. Vice President and Treasurer July 24, 1998
- --------------------------- (Principal Financial and
Warren W. Chase, Jr. Accounting Officer)
/s/ James W. Murphy Director and Clerk July 24, 1998
- ---------------------------
James W. Murphy
/s/ Kelly A. Adler Director July 24, 1998
- ---------------------------
Kelly A. Adler
/s/ Harold W. Bemis Director July 24, 1998
- ----------------------------
Harold W. Bemis
<PAGE>
Signatures Title Date
---------- ----- ----
/s/ William L. Casey Director July 24, 1998
- ----------------------------
William L. Casey
/s/ Paul J. DeSimone Director July 24, 1998
- ----------------------------
Paul J. DeSimone
/s/ John G. Dugan Director July 24, 1998
- ----------------------------
John G. Dugan
/s/ Richard Giusti Director July 24, 1998
- ----------------------------
Richard Giusti
/s/ John Hasenjaeger Director July 24, 1998
- ----------------------------
John Hasenjaeger
/s/ Robert J. Heavey Director July 24, 1998
- ----------------------------
Robert J. Heavey
/s/ Thomas R. Howie Director July 24, 1998
- ----------------------------
Thomas R. Howie
/s/ Kenneth C.A. Isaacs Director July 24, 1998
- ----------------------------
Kenneth C.A. Isaacs
/s/ Paul V. Kenney Director July 24, 1998
- ----------------------------
Paul V. Kenney
/s/ Eugene R. Liscombe Director July 24, 1998
- ----------------------------
Eugene R. Liscombe
/s/ Robert A. Matson Director July 24, 1998
- ----------------------------
Robert A. Matson
/s/ Lawrence E. Novick Director July 24, 1998
- ----------------------------
Lawrence E. Novick
<PAGE>
================================================================================
As filed with the Securities and Exchange Commission on July 28, 1998
Registration No. 333-56851
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
EXHIBITS
TO
PRE-EFFECTIVE AMENDMENT NO. 1
TO THE
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------------
SERVICE BANCORP, INC.
================================================================================
<PAGE>
EXHIBIT INDEX
1.1 Engagement Letter between Summit Bank and Trident Securities, Inc.*
1.2 Form of Agency Agreement among Service Bancorp, Inc., Summit Bank, and
Trident Securities, Inc.
2 Service Bancorp, MHC and Summit Bank Stock Issuance Plan*
3.1 Articles of Organization of Service Bancorp, Inc.
3.2 Bylaws of Service Bancorp, Inc.
4 Form of Common Stock Certificate of Service Bancorp, Inc.*
5 Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. regarding legality
of securities being registered*
8.1 Federal Tax Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C.*
8.2 State Tax Opinion of Wolf & Company, P.C.*
8.3 Letter from RP Financial, LC. with respect to Subscription Rights*
10.1 Form of Employment Agreement*
10.2 Form of Severance Agreement*
10.3 Employee Stock Ownership Plan*
21 Subsidiaries of the Registrant*
23.1 Consent of Luse Lehman Gorman Pomerenk & Schick, P.C. (contained in
opinion filed as Exhibit 5)
23.2 Consent of Wolf & Company, P.C. with respect to Report on Financial
Statements
23.3 Consent of Wolf & Company, P.C. with respect to State Tax Opinion*
23.4 Consent of RP Financial, LC.
24 Power of Attorney (set forth on Signature Page)
27 EDGAR Financial Data Schedule*
99.1 Appraisal Agreement between Summit Bank and RP Financial, LC.*
99.2 Business Plan Agreement between Summit Bank and RP Financial, LC.*
99.3 Appraisal Report of RP Financial, LC.**
99.4 Marketing Materials
99.5 Order and Acknowledgment Form
- ---------------
* Previously filed.
** Separately bound.
Exhibit 1.2
SERVICE BANCORP, INC.
SUMMIT BANK
765,000 to 1,190,250 Shares
Common Stock
(Par Value $.01 Per Share)
$10.00 Per Share
SALES AGENCY AGREEMENT
July [ ], 1998
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Ladies and Gentlemen:
Service Bancorp, Inc., a Massachusetts corporation (the "Company"),
Service Bancorp, MHC, a Massachusetts-chartered mutual holding company (the
"MHC"), and Summit Bank, a Massachusetts-chartered stock savings bank (the
"Bank"), each hereby confirm, as of July [ ], 1998, their respective agreements
with Trident Securities, Inc. ("Trident"), a broker-dealer registered with the
Securities and Exchange Commission (the "Commission") and a member of the
National Association of Securities Dealers, Inc. ("NASD"), as follows:
1. Introduction. On April 1, 1998, the Board of Directors of the Bank
and the Board of Trustees of the MHC adopted a stock issuance plan (the "Plan")
pursuant to which the Company was incorporated as a direct subsidiary of the MHC
to own 100% of the capital stock of the Bank (together with the Offerings, as
defined below, the "Reorganization"). In accordance with the Plan, the Company
is offering 45% of the shares of its common stock, par value $.01 per share (the
"Shares" and the "Common Stock"), pursuant to nontransferable subscription
rights in a subscription offering (the "Subscription Offering") to certain
depositors of the Bank, the Bank's tax-qualified employee benefit plans (i.e.,
the Bank's Employee Stock Ownership Plan (the "ESOP")), and employees officers,
directors, and trustees of the Bank and the MHC. Shares for which subscriptions
are not received in the Subscription Offering may be offered to members of the
general public in a community offering, with preference being given first to
natural persons residing in the towns of Franklin, Medway, Medfield, and Millis,
Massachusetts (the "Community Offering") (the Subscription Offering and the
Community Offering are sometimes referred to collectively as the "Offerings"),
subject to the right of the Company and the Bank, in their absolute discretion,
to reject orders in the Community Offering in whole or in part. In the
Offerings, the Company is offering between 765,000 and 1,035,000 Shares, with
the possibility of offering up to 1,190,250 Shares without a resolicitation of
subscribers. Except for certain benefit plans, no individual person,
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 2
persons having a joint account, or persons acting in concert may purchase more
than $100,000 of Shares issued in the Reorganization.
The Company and the Bank have been advised by Trident that it will
utilize its best efforts to assist the Company and the Bank with the sale of the
Shares in the Offerings and, if deemed necessary by the Company, in a syndicated
community offering (the "Syndicated Community Offering"). Prior to the execution
of this Agreement, the Company has delivered to Trident (a) the Prospectus,
dated [ ], 1998, (as hereinafter defined), (b) the Notice and Information
Statement, dated July 7, 1998, for the solicitation of votes from the
corporators of the MHC (the "Corporators") at the Special Meeting of Corporators
to approve the Plan (the "Notice and Information Statement"), and (c) all
supplements thereto, if any, to be used in the Reorganization. The Prospectus
and the Notice and Information Statement contain information with respect to the
Company, the MHC, the Bank, and the Shares.
2. Representations and Warranties.
(a) The Company, the MHC, and the Bank. The Company and the Bank,
jointly and severally, represent and warrant as of the date of this
Agreement, and the Company, the MHC, and the Bank, jointly and
severally, represent and warrant as of the Closing Date (as
hereinafter defined), to Trident that:
(i) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement,
including exhibits and an amendment or amendments thereto, on
Form SB-2 (No. 333-xxxxx), including a Prospectus relating to
the Offerings, for the registration of the Shares under the
Securities Act of 1933, as amended (the "Act"); and such
registration statement has become effective under the Act and no
stop order has been issued with respect thereto and no
proceedings therefor have been initiated or, to the Company's
knowledge, threatened by the Commission. Except as the context
may otherwise require, such registration statement, as amended
or supplemented, on file with the Commission at the time the
registration statement became effective, including the
Prospectus, financial statements, schedules, exhibits and all
other documents filed as part thereof, as amended and
supplemented, is herein called the "Registration Statement," and
the Prospectus, as amended or supplemented, on file with the
Commission at the time the Registration Statement became
effective is herein called the "Prospectus," except that if the
Prospectus filed by the Company with the Commission pursuant to
Rule 424(b) of the general rules and regulations of the
Commission under the Act (together with the enforceable
published policies and actions of the Commission thereunder, the
"SEC Regulations") differs from the form of Prospectus on file
at the time the Registration Statement became effective, the
term "Prospectus" shall refer to the Rule 424(b) Prospectus from
and after the time it is filed with or mailed for filing to the
Commission and shall include any amendments or supplements
thereto
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 3
from and after their dates of effectiveness or use,
respectively. If any Shares remain unsubscribed following
completion of the Subscription Offering and the Community
Offering, if any, the Company (i) will promptly file with the
Commission a post-effective amendment to such Registration
Statement relating to the results of the Subscription Offering
and the Community Offering, if any, any additional information
with respect to the proposed plan of distribution and any
revised pricing information or (ii) if no such post-effective
amendment is required, will file with, or mail for filing to,
the Commission a Prospectus or Prospectus supplement containing
information relating to the results of the Subscription and the
Community Offerings and pricing information pursuant to Rule
424(c) of the SEC Regulations, in either case in a form
reasonably acceptable to the Company and Trident.
(ii) The Bank and the MHC have filed an Application for
Approval of: (i) Establishment of "Mid-Tier" Stock Holding
Company; and (ii) Issuance by such Company of Securities to the
General Public, including exhibits attached thereto (as amended
or supplemented, the "Division Application") with the
Commonwealth of Massachusetts Division of Banks (the "Division")
which has been approved by the Division; and the Prospectus and
the Notice and Information Statement included as part of the
Division Application have been approved for use by the Division.
No order has been issued by the Division preventing or
suspending the use of the Prospectus or the Notice and
Information Statement; and no action by the Division revoking
such approvals is pending or, to the Bank's knowledge,
threatened. Additionally, the Company has filed an application
to register as a bank holding company (the "Holding Company
Application") with the Board of Governors of the Federal Reserve
System (the "Federal Reserve") which has been approved by the
Federal Reserve. No action by or before the Federal Reserve
revoking such approval is pending or, to the Bank's knowledge,
threatened.
(iii) At the date of the Prospectus and at all times
subsequent thereto through and including the Closing Date (as
hereinafter defined) (i) the Registration Statement and the
Prospectus (as amended or supplemented, if amended or
supplemented) complied with and will comply with the Act and the
SEC Regulations, (ii) the Prospectus and the Notice and
Information Statement (as amended and supplemented, if amended
and supplemented) complied with and will comply with all
applicable provisions of the Massachusetts General Laws, as
amended, and the rules and regulations of the Division and other
applicable Massachusetts law (collectively, the "Division
Regulations"), (iii) the Registration Statement (as amended or
supplemented, if amended or supplemented) did not and will not
contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (iv) the
Prospectus and the Notice and Information Statement (as amended
or supplemented, if amended or supplemented) did not contain any
untrue
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 4
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading. Representations or warranties
in this subsection shall not apply to statements or omissions
made in reliance upon and in conformity with written information
furnished to the Company or the Bank relating to Trident by or
on behalf of Trident expressly for use in the Registration
Statement, the Prospectus, or the Notice and Information
Statement.
(iv) The Company is duly organized and is in good standing
as a business corporation under the laws of the Commonwealth of
Massachusetts. The MHC is duly organized and is in good standing
as a mutual holding company under the laws of the Commonwealth
of Massachusetts. The Bank is duly organized and has a corporate
existence as a stock savings bank under the laws of the
Commonwealth of Massachusetts. Each of the Company, the MHC, and
the Bank is validly existing under the laws of the jurisdiction
of its organization with full power and authority to own its
property and conduct its business as described in the
Registration Statement and Prospectus. The Bank is a member in
good standing of the Federal Home Loan Bank of Boston, and the
deposit accounts of the Bank are insured by the Bank Insurance
Fund ("BIF") of the Federal Deposit Insurance Corporation (the
"FDIC"), up to the maximum amount permitted by law, and by the
Depositors Insurance Fund in excess of such amount. Each of the
Company, the MHC, and the Bank is not required to be qualified
to do business as a foreign corporation in any jurisdiction
where non-qualification would have a material adverse effect on
the condition (financial or otherwise), operations, business,
assets, earnings, or properties ("Material Adverse Effect"), on
the Company and the Bank, taken as a whole. Upon completion of
the transactions contemplated by the Prospectus, (i) all of the
authorized and outstanding capital stock of the Bank will be
owned of record and beneficially by the Company, (ii) all of the
authorized and outstanding stock of the Company will be issued
to the MHC and the public, and (iii) the Company will have no
direct subsidiaries other than the Bank.
(v) The Bank does not own equity securities of, or an equity
interest in, any business enterprise except as described in the
Prospectus; and such equity securities and equity interests are
owned by the Bank in accordance with all applicable law.
(vi) The Bank has good, marketable and insurable title to
all assets material to its business and to those assets
described in the Prospectus as owned by it, free and clear of
all material liens, charges, encumbrances or restrictions,
except for liens for taxes not yet due, except as described in
the Prospectus or are not expected to have a Material Adverse
Effect on the Bank and the Company, taken as a whole; and all of
the leases and subleases material to the operations or financial
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 5
condition of the Bank under which it holds properties, including
those described in the Prospectus, are in full force and effect
as described therein.
(vii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary actions on the part
of each of the Company, the MHC, and the Bank, and this
Agreement is a valid and binding obligation of each of the
Company, the MHC, and the Bank enforceable in accordance with
its terms (except as the enforceability thereof may be limited
by bankruptcy, insolvency, moratorium, reorganization or similar
laws relating to or affecting the enforcement of creditors'
rights generally or the rights of creditors of bank holding
companies the accounts of whose subsidiaries are insured by the
FDIC or by general equity principles, regardless of whether such
enforceability is considered in a proceeding in equity or at
law, and except to the extent that the provisions of Sections 8
and 9 hereof may be unenforceable as against public policy or
pursuant to Sections 23A or 23B of the Federal Reserve Act, 12
U.S. C. Sections 371c ("Section 23A" or 371c-1 ("Section 23B")).
(viii) There is no litigation or governmental proceeding
pending or, to the knowledge of the Company, the MHC, or the
Bank, threatened against or involving the Company, the MHC, the
Bank, or any of their respective assets which individually or in
the aggregate would reasonably be expected to have a Material
Adverse Effect on of the Company, the MHC, and the Bank, taken
as a whole.
(ix) The Company, the MHC, and the Bank have received the
opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. with
respect to federal income tax consequences of the
Reorganization, to the effect that the Reorganization will
constitute a tax-free reorganization under the Internal Revenue
Code of 1986, as amended, and an opinion from Wolf & Company
P.C., that the Reorganization will not be a taxable transaction
for the Bank or the Company under the laws of the Commonwealth
of Massachusetts, and the facts relied upon in such opinions are
accurate and complete.
(x) Each of the Company, the MHC, and the Bank has all such
corporate power, authority, authorizations, approvals, and
orders as may be required to enter into this Agreement and to
carry out the provisions and conditions hereof, subject to the
limitations set forth herein and subject to the satisfaction of
certain conditions imposed by the Division and/or the Federal
Reserve in connection with their approvals of the Division
Application and the Holding Company Application and except as
may be required under the securities, or "blue sky," laws of
various jurisdictions, and, in the case of the Company, as of
the Closing Date (as hereinafter defined), to issue and sell the
Shares to be sold by the Company as provided herein, and, in the
case of the Bank, as of the Closing Date (as hereinafter
defined), to issue
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 6
and sell the shares of its capital stock to be sold to the
Company as provided in the Plan.
(xi) None of the Company, the MHC, nor the Bank is in
violation of any rule or regulation of the Division or the FDIC
that could reasonably be expected to result in any enforcement
action against the Company, the MHC, the Bank, or their officers
or directors that might have a Material Adverse Effect on the
Company, the MHC, and the Bank, taken as a whole.
(xii) The consolidated financial statements and any related
notes or schedules which are included in the Registration
Statement and the Prospectus fairly present the consolidated
financial condition, income, net worth, and cash flows of the
Bank at the respective dates thereof and for the respective
periods covered thereby and comply as to form with the
applicable accounting requirements of both the SEC Regulations
and the Division Regulations. Such financial statements have
been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved,
except as set forth therein, and such financial statements are
consistent with financial statements and other reports filed by
the Bank with supervisory and regulatory authorities, except as
such generally accepted accounting principles may otherwise
require. The tables and other financial, statistical, and pro
forma information and related notes in the Prospectus accurately
present the information purported to be shown thereby at the
respective dates thereof and for the respective periods covered
thereby.
(xiii) There has been no material change in the financial
condition, results of operations or business, including assets
and properties, of the Company, the MHC, and the Bank, taken as
a whole, since the latest date as of which such condition is set
forth in the Prospectus, except as set forth therein; and the
capitalization, assets, properties, and business of each of the
Company, the MHC, and the Bank conform to the descriptions
thereof contained in the Prospectus. None of the Company, the
MHC, nor the Bank has any material liabilities of any kind,
contingent or otherwise, except as specifically set forth in the
Prospectus.
(xiv) There has been no breach or default (or the occurrence
of any event which, with notice or lapse of time or both, would
constitute a default) under, or creation or imposition of any
lien, charge or other encumbrance upon any of the properties or
assets of the Company, the MHC, and the Bank pursuant to any of
the terms, provisions or conditions of, any agreement, contract,
indenture, bond, debenture, note, instrument, or obligation to
which the Company, the MHC, or the Bank is a party or by which
any of them or any of their respective assets or properties may
be bound or is subject, or violation of any governmental license
or permit or any enforceable published law, administrative
regulation, or order or court order, writ,
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 7
injunction, or decree, which breach, default, encumbrance, or
violation would have a Material Adverse Effect on the Company,
the MHC, and the Bank, taken as a whole; all agreements which
are material to the financial condition, results of operations,
or business of the Company, the MHC, and the Bank, taken as a
whole, are in full force and effect, and no party to any such
agreement has instituted or, to the knowledge of the Company,
the MHC, and the Bank, threatened any action or proceeding
wherein the Company, the MHC, or the Bank would be alleged to be
in default thereunder.
(xv) None of the Company, the MHC, nor the Bank is in
violation of its respective articles of incorporation, charter,
or bylaws. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby do not
conflict with or result in a breach of the respective articles
of incorporation, charter, or bylaws of the Company, the MHC, or
the Bank, or constitute a material breach of or default (or an
event which, with notice or lapse of time or both, would
constitute a default) under, give rise to any right of
termination, cancellation, or acceleration contained in, or
result in the creation or imposition of any lien, charge, or
other encumbrance upon any of the properties or assets of the
Company, the MHC, or the Bank pursuant to any of the terms,
provisions, or conditions of, any material agreement, contract,
indenture, bond, debenture, note, instrument, or obligation to
which the Company, the MHC, or the Bank is a party, or violate
any governmental license or permit or any enforceable published
law, administrative regulation, order or court order, writ,
injunction, or decree (subject to the satisfaction of certain
conditions imposed by the Division or the Federal Reserve in
connection with their approval of the Division Application or
the Holding Company Application, respectively), which breach,
default, encumbrance or violation would have a Material Adverse
Effect on the Company, the MHC, and the Bank, taken as a whole.
(xvi) Subsequent to the respective dates as of which
information is given in the Registration Statement, the
Prospectus, or the Notice and Information Statement and prior to
the Closing Date (as hereinafter defined), except as otherwise
may be indicated or contemplated therein, none of the Company,
the MHC, nor the Bank has issued any securities which will
remain issued at the Closing Date (as hereinafter defined) or
incurred any liability or obligation, direct or contingent, or
borrowed money, except borrowings by the Bank in the ordinary
course of business, or entered into any other transaction not in
the ordinary course of business and consistent with prior
practices, which is material in light of the business of the
Company, the MHC, and the Bank.
(xvii) Upon consummation of the Reorganization, the
authorized, issued, and outstanding equity capital of the
Company shall be within the range as set forth in the Prospectus
under the caption "Capitalization," and no equity or debt
securities
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 8
of the Company have been or shall be issued and outstanding
prior to the Closing Date (as hereinafter defined); the issuance
and the sale of the Shares of the Company have been duly
authorized by all necessary action of the Company and approved
by the Division and, when issued in accordance with the terms of
the Plan and paid for, shall be validly issued, fully paid, and
nonassessable and shall conform to the description thereof
contained in the Prospectus; the issuance of the Shares is not
subject to preemptive rights, except as set forth in the
Prospectus; and good title to the Shares will be transferred by
the Company upon issuance thereof against payment therefor, free
and clear of all claims, encumbrances, security interests, and
liens against the Company whatsoever. The certificates
representing the Shares will conform in all material respects
with the requirements of applicable laws and regulations. The
issuance and sale of (a) the capital stock of the Bank to the
Company and (b) the Shares of the Company to the MHC and the
public have been duly authorized by all necessary action of the
Bank and the Company and appropriate regulatory authorities
(subject to the satisfaction of various conditions, if any,
imposed by the Division or the Federal Reserve in connection
with their approvals of the Division Application and the Holding
Company Application, respectively), and such capital stock, when
issued in accordance with the terms of the Plan, will be fully
paid and nonassessable and will conform in all material respects
to the description thereof contained in the Prospectus.
(xviii) No approval of any regulatory or supervisory or
other public authority is required in connection with the
execution and delivery of this Agreement or the issuance of the
Shares, except for the declaration of effectiveness of any
required post-effective amendment by the Commission and final
approvals of the Reorganization by the Division and approval of
the Company's Holding Company Application by the Federal
Reserve, and as may be required under the securities laws of
various jurisdictions.
(xix) All contracts and other documents required to be filed
as exhibits to the Registration Statement, the Division
Application, or the Holding Company Application have been filed
with the Commission, the Division, and/or the Federal Reserve,
as the case may be.
(xx) Wolf & Company, P.C., which has audited the
consolidated financial statements of the Bank at June 30, 1997
and 1996 and for the years ended June 30, 1997 and 1996 included
in the Prospectus, are, and were during the period covered in
its report in the Prospectus, independent public accountants
within the meaning of the Code of Professional Ethics of the
American Institute of Certified Public Accountants and Title 12
of the Code of Federal Regulations, Section 303.15.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 9
(xxi) RP Financial, L.C., which has prepared the
Reorganization appraisal, dated [May 29], 1998, described in the
Prospectus is independent of the Company and the Bank within the
meaning of the Division Regulations and the regulations
promulgated by the FDIC (the "FDIC Regulations"), is believed by
the Company and the Bank to be experienced and expert in
rendering corporate appraisals of savings institutions, and the
Company and the Bank have no reason to believe that RP
Financial, L.C. has not prepared the pricing information set
forth in the Prospectus in accordance with the requirements of
the Division Regulations and the FDIC Regulations.
(xxii) The Company, the MHC, and the Bank have timely filed
all required federal, state, and local franchise tax returns and
no deficiency has been asserted with respect to such returns by
any taxing authorities, have paid all taxes that have become due
and, to their knowledge, have made adequate reserves for similar
future tax liabilities, except where any failure to make such
filings, payments, and reserves, or the assertion of such a
deficiency, would not have a Material Adverse Effect on the
Company, the MHC, and the Bank, taken as a whole.
(xxiii) All of the loans represented as assets of the Bank
on the most recent financial statements of the Bank included in
the Prospectus meet or are exempt from all requirements of
federal, state, or local law pertaining to lending, including
without limitation truth in lending (including, without
limitation, the requirements of Regulation Z and 12 C.F.R. Part
226), real estate settlement procedures, consumer credit
protection, equal credit opportunity, and all disclosure laws
applicable to such loans, except for violations which, if
asserted, would not have a Material Adverse Effect on the
Company, the MHC, and the Bank, taken as a whole.
(xxiv) The records of account holders, depositors,
borrowers, and other members of the Bank delivered to Trident by
the Bank or its agent for use during the Reorganization are
reliable, accurate, and complete, and Trident shall have no
liability to any person relating to the reliability, accuracy,
or completeness of such records or for any denial or allocation
of a subscription to purchase Shares to any person based upon
such records.
(xxv) To the knowledge of the Company, the MHC, and the
Bank, none of the Company, the MHC, the Bank, nor directors,
trustees, or employees of the Company, the MHC, or the Bank have
made any payment of, or set aside any, funds of the Company, the
MHC, or the Bank as a loan to any person other than to the ESOP
for the purchase of the Shares or as otherwise prohibited by
law.
(xxvi) To the knowledge of the Company, the MHC, and the
Bank, the Company, the MHC, and the Bank are in compliance in
all material respects with all
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 10
Environmental Law (as hereinafter defined), and none of the
Company, the MHC, nor the Bank has been notified or is otherwise
aware that any of them is potentially liable, or is considered
potentially liable, under any Environmental Law, including the
Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601 et seq. or any similar state or local
law. There are no actions, suits, regulatory investigations or
other proceedings pending or, to the knowledge of the Company,
the MHC, or the Bank, threatened against the Company, the MHC,
or the Bank relating to Environmental Law matters, nor does the
Company, the MHC, or the Bank have any reason to believe any
such proceedings may be brought against any of them. To the
knowledge of the Company, the MHC, and the Bank, no disposal,
release, or discharge of hazardous waste, hazardous substances,
toxic substances, pollutants, irritants or contaminants,
including petroleum and gas products, as any of such terms may
be defined under any Environmental Law, has occurred on, in, at
or about any of the facilities or properties of the Company, the
MHC, or the Bank in violation of Environmental Law, or, to the
knowledge of the Company, the MHC, and the Bank, has occurred
on, in, at, or about any of the facilities or properties pledged
to the Bank as collateral for any loan or extension of credit by
the Bank, except such disposal, release or discharge as
reasonably could not be deemed to have a Material Adverse Effect
on the Company, the MHC, and the Bank, taken as a whole.
"Environmental Law" means any federal, state, local or
foreign law, statute, ordinance, rule, regulation, code,
license, permit, authorization, approval, consent, order,
judgment, decree, injunction or agreement with any agency (i.e.,
any federal, state or local agency responsible for regulating or
enforcing the matters identified herein) relating to (i) the
protection, preservation or restoration of the environment
(including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface soil, subsurface
soil, plant and animal life or any other natural resource),
and/or (ii) the usage, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or disposal of any substance presently
listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous, or otherwise regulated, whether by
type or by quantity, including any material containing any such
substance as a component.
(xxvii) At the Closing Date (as hereinafter defined), the
Company, the MHC, and the Bank will have completed the
conditions precedent to, and shall have conducted the
Reorganization in all material respects in accordance with, the
Plan, the Division Regulations and all other applicable laws,
regulations, published decisions, and orders, including all
terms, conditions, requirements, and provisions precedent to the
Reorganization imposed by the Division and the Federal Reserve.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 11
(b) Trident. Trident represents and warrants to the Company, the
MHC, and the Bank that:
(i) Trident is registered as a broker-dealer with the
Commission, and is in good standing with the Commission and the
NASD.
(ii) Trident is validly existing as a corporation in good
standing under the laws of the State of North Carolina, with
full corporate power and authority to provide the services to be
furnished to the Company, the MHC, and the Bank hereunder.
(iii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary action on the part
of Trident, and this Agreement is a legal, valid, and binding
obligation of Trident, enforceable in accordance with its terms
(except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization, or similar
laws relating to or affecting the enforcement of creditors'
rights generally or the rights of creditors of registered
broker-dealers accounts of whose may be protected by the
Securities Investor Protection Corporation or by general equity
principles, regardless of whether such enforceability is
considered in a proceeding in equity or at law, and except to
the extent that the provisions of Sections 8 and 9 hereof may be
unenforceable as against public policy or pursuant to Section
23A).
(iv) Trident and, to Trident's knowledge, its employees,
agents, and representatives who shall perform any of the
services required hereunder to be performed by Trident shall be
duly authorized and shall have all licenses, approvals, and
permits necessary to perform such services; and Trident is a
registered selling agent in the jurisdictions listed in Exhibit
A attached hereto and will remain registered in such
jurisdictions in which the Company is relying on such
registration for the sale of the Shares, until the
Reorganization is consummated or terminated.
(v) The execution and delivery of this Agreement by Trident,
the fulfillment of the terms set forth herein and the
consummation of the transactions contemplated hereby shall not
violate or conflict with the corporate charter or bylaws of
Trident or constitute a breach of, or default (or an event
which, with notice or lapse of time, or both, would constitute a
default) under any material agreement, indenture, or other
instrument by which Trident is bound or under any governmental
license or permit or any law, administrative regulation,
authorization, approval, or order or court decree, injunction,
or order.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 12
(vi) Any funds received by Trident to purchase Common Stock
will be handled in accordance with Rule 15c2-4 under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(vii) There is not now pending or, to Trident's knowledge,
threatened against Trident any action or proceeding before the
Commission, the NASD, any state securities commission, or any
state or federal court concerning Trident's activities as a
broker-dealer.
3. Employment of Trident: Sale and Delivery of the Shares. On the basis
of the representations and warranties herein contained, but subject to the terms
and conditions herein set forth, the Company, the MHC, and the Bank hereby
employ Trident as their agent to utilize its best efforts to assist the Company
with its sale of the Shares in the Offerings.
In the event the Company is unable to sell a minimum of 765,000 Shares
(or such lesser amount as the Division may permit) within the period herein
provided, this Agreement shall terminate, and the Company, the MHC, and the Bank
shall refund promptly to any persons who have subscribed for any of the Shares,
the full amount which it may have received from them, together with interest as
provided in the Plan, and no party to this Agreement shall have any obligation
to the other party hereunder, except as set forth in Sections 6, 8, and 9
hereof. Appropriate arrangements for placing the funds received from
subscriptions for Shares in interest-bearing accounts with the Bank until all
Shares are sold and paid for were made prior to the commencement of the
Offerings, with provision for prompt refund to the purchasers as set forth
above, or for delivery to the Company if all Shares are sold.
If all conditions precedent to the consummation of the Reorganization
are satisfied, including the sale of all Shares required by the Plan to be sold,
the Company agrees to issue or have issued such Shares and to release for
delivery certificates to subscribers thereof for such Shares on or promptly
after the Closing Date (as hereinafter defined). Such release for delivery shall
be against payment to the Company by any means authorized pursuant to the
Prospectus, at the office of the Company at 81 Main Street, Medway,
Massachusetts 02053 or at such other place as shall be agreed upon among the
parties hereto. The date upon which Trident is paid the compensation due
hereunder is herein called the "Closing Date."
Trident may assemble and manage a selling group of broker-dealers,
which are members of the NASD, to participate in the solicitation of orders for
Common Stock in the event of the Syndicated Community Offering. In such event,
Trident agrees either (a) upon receipt of an executed order form of a subscriber
to forward the offering price of the Common Stock ordered on or before twelve
noon on the next business day following receipt or execution of an order form by
Trident to the Bank for deposit in a segregated account or (b) to solicit
indications of interest in which event (i) Trident will subsequently contact any
potential subscriber indicating interest to confirm the interest and give
instructions to execute and return an order form or to receive authorization to
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 13
execute the order form on the subscribers behalf, (ii) Trident will mail
acknowledgments of receipt of orders to each subscriber confirming interest on
the business day following such confirmation, (iii) Trident will debit accounts
of such subscribers on the third business day ("debit date") following receipt
of the confirmation referred to in (i), and (iv) Trident will forward completed
order forms together with such funds to the Bank on or before twelve noon on the
next business day following the debit date for deposit in a segregated account.
Trident acknowledges that if the procedure in clause (b) is adopted,
subscribers' funds are not required to be in their accounts until the debit
date.
In addition to the expenses specified in Section 6 hereof, Trident
shall receive the following compensation for its services hereunder upon
completion and closing of the Reorganization and the Offerings:
(a) A commission equal to two percent (2.0%) of the aggregate dollar
amount of Common Stock sold in the Offerings, excluding any shares of
stock sold to the Bank's directors, executive officers, employees, and
the ESOP; provided, however, that such commission shall not exceed
$150,000. Additionally, commissions are excluded on sale of Common Stock
to "Associates" (as such term is defined in the Plan) of the Bank's
directors and executive officers. For stock sold by other NASD member
firms under selected dealer's agreements, the commission payable shall
be as agreed upon by the Company and Trident to reflect market
requirements at the time of the stock allocation in the Syndicated
Community Offering. All such fees payable to Trident are to be payable
in next day funds to Trident in Raleigh, North Carolina, on the Closing
Date.
(b) Trident shall be reimbursed for allowable expenses, incurred by
it whether or not the Offerings are successfully completed; provided,
however, that (i) reimbursable legal fees (exclusive of "blue sky"
related matters) will not exceed $27,500, exclusive of disbursements,
(ii) other reimbursable expenses will not exceed $10,000, and (iii)
neither the Company nor the Bank shall pay or reimburse Trident for any
of the foregoing expenses accrued after Trident shall have notified the
Company or the Bank of its election to terminate this Agreement pursuant
to Section 11 hereof or after such time as the Company or the Bank shall
have given notice in accordance with Section 12 hereof that Trident is
in breach of this Agreement. Full payment to defray Trident's
reimbursable expenses shall be made in next-day funds on the Closing
Date or, if the Reorganization is not completed and is terminated for
any reason, within ten (10) business days of receipt by the Company of a
written request from Trident for reimbursement of its expenses. Trident
acknowledges receipt of $10,000 advance payment from the Bank which
shall be credited against the total reimbursement due Trident hereunder.
(c) Notwithstanding the limitations on reimbursement of Trident for
allocable expenses provided in the immediately preceding paragraph (b),
in the event that a resolicitation or other event causes the Offerings
and the Syndicated Community Offering to be extended beyond their
original expiration dates, Trident shall be reimbursed for its
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 14
allocable expenses (including legal expenses) incurred during such
extended period, provided that the allowance for allowable expenses
provided for in the immediately preceding paragraph (b) above have been
exhausted.
(d) The Company shall pay any stock issue and transfer taxes which
may be payable with respect to the sale of the Shares. The Company and
the Bank also shall pay all expenses of the Reorganization including,
but not limited to, their attorneys' fees, NASD filing fees, and filing
and registration fees, attorneys' fees relating to any required state
securities laws research and filings, telephone charges, air freight,
rental equipment, supplies, transfer agent charges, fees relating to
auditing and accounting, and costs of printing all documents necessary
in connection with the Reorganization.
4. Offering. Subject to the provisions of Section 7 hereof, Trident is
assisting the Company on a best efforts basis in offering a minimum of 765,000
and a maximum of 1,035,000 Shares, with the possibility of offering up to
1,190,250 Shares (except as the Division may permit such amount to be decreased
or increased) in a Subscription Offering and, if necessary, any Shares that
remain unsubscribed at the conclusion of the Subscription Offering, in a
Community Offering and a Syndicated Community Offering. The Shares are to be
offered to the public at the price set forth on the cover page of the
Prospectus.
5. Further Agreements. The Company and the Bank, jointly and severally,
covenant and agree that:
(a) The Company shall deliver to Trident, from time to time, such
number of copies of the Prospectus as Trident reasonably may request.
The Company authorizes Trident to use the Prospectus in any lawful
manner in connection with the offer and sale of the Shares.
(b) The Company shall notify Trident immediately upon discovery, and
confirm the notice in writing, (i) when any post-effective amendment to
the Registration Statement becomes effective or any supplement to the
Prospectus or the Notice and Information Statement has been filed, (ii)
of the issuance by the Commission, the Division or the Federal Reserve
of any stop order relating to the Registration Statement, the Division
Application, the Holding Company Application, the Prospectus, or the
Notice and Information Statement, or of the initiation or the threat of
any proceedings for that purpose, (iii) of the receipt of any notice
with respect to the suspension of the qualification of the Shares for
offering or sale in any jurisdiction, and (iv) of the receipt of any
comments from the Commission, the Division, or the Federal Reserve
relating to the Registration Statement, the Division Application, the
Holding Company Application, the Prospectus, or the Notice and
Information Statement. If the Commission, the Division, or the Federal
Reserve enters a stop order relating to the Registration Statement, the
Division Application, the Holding Company Application, the Prospectus,
or the Notice and Information Statement at any time, the Company and the
Bank
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 15
shall make every reasonable effort to obtain the lifting of such order
at the earliest possible moment.
(c) During the time when a Prospectus is required to be delivered
under the Act and the Division Regulations, the Company will comply so
far as it is able with all requirements imposed upon it by the Act, as
now in effect and hereafter amended, and by the SEC Regulations, as from
time to time in force, so far as necessary to permit the continuance of
offers and sales of or dealings in the Shares in accordance with the
provisions hereof and the Prospectus. If during the period when the
Prospectus is required to be delivered in connection with the offer and
sale of the Shares any event relating to or affecting the Company, the
MHC, and the Bank shall occur as a result of which it is necessary, in
the opinion of counsel for Trident to amend or supplement the Prospectus
in order to make the Prospectus not false or misleading in light of the
circumstances existing at the time it is delivered to a purchaser of the
Shares, the Company forthwith shall prepare and furnish to Trident a
reasonable number of copies of an amendment or amendments or of a
supplement or supplements to the Prospectus (in form and substance
satisfactory to counsel for Trident) which shall amend or supplement the
Prospectus so that, as amended or supplemented, the Prospectus shall not
contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
light of the circumstances existing at the time the Prospectus is
delivered to a purchaser of the Shares, not misleading. The Company will
not file or use any amendment or supplement to the Registration
Statement or the Prospectus of which Trident has not first been
furnished a copy or to which Trident shall reasonably object after
having been furnished such copy. For the purposes of this subsection,
the Company and the Bank shall furnish such information with respect to
themselves as Trident from time to time may reasonably request.
(d) The Company and the Bank have taken or will take all reasonably
necessary action as may be required to qualify or register the Shares
for offer and sale by the Company under the securities or blue sky laws
of such jurisdictions as Trident and either the Company or its counsel
may agree upon; provided, however, that the Company shall not be
obligated to qualify as a foreign corporation to do business under the
laws of any such jurisdiction. In each jurisdiction where such
qualification or registration shall be effected, the Company, unless
Trident agrees that such action is not necessary or advisable in
connection with the distribution of the Shares, shall file and make such
statements or reports as are, or reasonably may be, required by the laws
of such jurisdiction.
(e) Appropriate entries will be made in the financial records of the
Bank sufficient to establish a liquidation account for the benefit of
eligible account holders as of March 31, 1997 and supplemental eligible
account holders as of June 30, 1998 in accordance with the requirements
of the Division.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 16
(f) The Company will file a registration statement for the Common
Stock under Section 12(g) of the Exchange Act, prior to completion of
the stock offering pursuant to the Plan and shall request that such
registration statement be effective upon completion of the
Reorganization. The Company shall maintain the effectiveness of such
registration for a minimum period of three years or for such shorter
period as may be required by applicable law.
(g) The Company will make generally available to its security
holders as soon as practicable, but not later than forty-five (45) days
after the close of the period covered thereby, an earnings statement (in
form complying with the provisions of Rule 158 of the regulations
promulgated under the Act) covering a twelve-month period beginning not
later than the first day of the Company's fiscal quarter next following
the effective date (as defined in said Rule 158) of the Registration
Statement.
(h) For a period of three years from the date of this Agreement
(unless the Common Stock shall have been deregistered under the Exchange
Act), the Company will furnish to Trident, as soon as publicly available
after the end of each fiscal year, a copy of its annual report to
shareholders for such year; and the Company will furnish to Trident (i)
as soon as publicly available, a copy of each report or definitive
Notice and Information Statement of the Company filed with the
Commission under the Exchange Act or mailed to shareholders, and (ii)
from time to time, such other public information concerning the Company
as Trident may reasonably request.
(i) The Company shall use the net proceeds from the sale of the
Shares consistently with the manner set forth in the Prospectus under
the caption "Use of Proceeds."
(j) The Company shall not deliver the Shares until each and every
condition set forth in Section 7 hereof has been satisfied, unless such
condition is waived in writing by Trident.
(k) The Company and the Bank shall advise Trident, if necessary, as
to the allocation of deposits, in the case of eligible account holders
and supplemental eligible account holders, and votes, in the case of the
Corporators, and of the Shares in the event of an oversubscription and
shall provide Trident final instructions as to the allocation of the
Shares ("Allocation Instructions") in such event and such information
shall be accurate and reliable. Trident shall be entitled to rely
completely and without independent investigation on such instructions
and shall have no liability in respect of its reliance thereon,
including without limitation, no liability for or related to any denial
or grant of a subscription (in whole or in part) for Shares.
(l) The Company and the Bank will take such actions and furnish such
information, and will cause the MHC to take such actions and furnish
such information, as
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 17
is reasonably requested by Trident in order for Trident to ensure
compliance with the NASD's "Interpretation Relating to Free-Riding and
Withholding."
(m) The Company will not sell or issue, contract to sell or issue,
or otherwise dispose of for any period of ninety (90) days after the
Closing Date, without Trident's prior written consent, any share of the
Company's capital stock other than the Common Stock.
(n) [Upon consummation of the Reorganization, the Company will list
the Common Stock over-the-counter through the OTC "Electronic Bulletin
Board."]
(o) The Company will maintain appropriate arrangements for
depositing all funds received from persons mailing subscriptions for or
orders to purchase Common Stock in the Offerings on an interest-bearing
basis at the rate described in the Plan until the Closing Date and
satisfaction of all conditions precedent to the release of the Company's
obligation to refund payments received from person subscribing for or
ordering Common Stock in the Offerings in accordance with the Plan or
until such funds have been made to the persons entitled thereto in
accordance with the Plan.
6. Payment of Expenses. Whether or not the Reorganization is
consummated, the Company and the Bank shall pay or reimburse Trident for (a) all
filing fees paid or incurred by Trident in connection with all filings with the
NASD with respect to the Subscription and Community Offerings and (b) in
addition, if the Company is unable to sell a minimum of 765,000 Shares or such
lesser amount as the Division may permit or the Reorganization is otherwise
terminated, the Company and the Bank shall reimburse Trident for allowable
expenses incurred by Trident relating to the offering of the Shares as provided
in Section 3 hereof; provided, however, that neither the Company nor the Bank
shall pay or reimburse Trident for any of the foregoing expenses accrued after
Trident shall have notified the Company or the Bank of its election to terminate
this Agreement pursuant to Section 11 hereof or after such time as the Company
or the Bank shall have given notice in accordance with Section 12 hereof that
Trident is in breach of this Agreement.
7. Conditions of Trident's Obligations. Except as may be waived by
Trident, the obligations of Trident as provided herein shall be subject to the
accuracy of the representations and warranties contained in Section 2 hereof as
of the date hereof and as of the Closing Date, to the performance by the
Company, the MHC, and the Bank of their obligations hereunder, and to the
following conditions:
(a) At the Closing Date, Trident shall receive the favorable opinion
of Luse, Lehman, Gorman, Pomerenk & Schick, special counsel for the
Company, the MHC, and the Bank, dated the Closing Date, addressed to
Trident, in form and substance satisfactory to counsel for Trident and
substantially as set forth in Exhibit B attached hereto.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 18
In rendering such opinion, such counsel may rely as to matters of
fact on certificates of officers and directors of the Company, the MHC,
and the Bank and certificates of public officials delivered pursuant
hereto. Such counsel may assume that any agreement is the valid and
binding obligation of any parties to such agreement other than the
Company, the MHC, and the Bank. Such opinion may be governed by, and
interpreted in accordance with, the Legal Opinion Accord (the "Accord")
of the ABA Section of Business Law (1991) and, as a consequence,
references in such opinions to such counsel's "knowledge" may be limited
to "actual knowledge" as defined in the Accord (or knowledge based on
certificates). Such opinions may be limited to present statutes,
regulations and judicial interpretations, and to facts as they presently
exist; in rendering such opinion, such counsel need assume no obligation
to revise or supplement them should the present laws be changed by
legislative or regulatory action, judicial decision, or otherwise; and
such counsel need express no view, opinion, or belief with respect to
whether any proposed or pending legislation, if enacted, or any
regulations or any policy statements issued by any regulatory agency,
whether or not promulgated pursuant to any such legislation, would
affect the validity of the execution and delivery by the Company, the
MHC, and the Bank of this Agreement or the issuance of the Shares.
(b) At the Closing Date, Trident shall receive the letter of Luse,
Lehman, Gorman, Pomerenk & Schick, dated the Closing Date, addressed to
Trident, in form and substance reasonably satisfactory to counsel for
Trident and substantially as set forth in Exhibit C attached hereto.
(c) Counsel for Trident shall have been furnished such documents as
it reasonably may require for the purpose of enabling it to review or
pass upon the matters required by Trident, and for the purpose of
evidencing the accuracy, completeness, or satisfaction of any of the
representations, warranties, or conditions herein contained, including
but not limited to, resolutions of the Board of Directors of the
Company, the MHC, and the Bank regarding the authorization of this
Agreement and the transactions contemplated hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion of
Trident, (i) there shall have been no material change in the financial
condition, business, or results of operations of the Company, the MHC,
and the Bank, taken as a whole, since the latest date as of which such
condition is set forth in the Prospectus, except as referred to therein;
(ii) there shall have been no transaction entered into by the Company,
the MHC, and the Bank after the latest date as of which the financial
condition of the Company, the MHC, or the Bank is set forth in the
Prospectus other than transactions referred to or contemplated therein,
transactions in the ordinary course of business, and transactions which
are not material to the Company, the MHC, and the Bank, taken as a
whole; (iii) none of the Company, the MHC, nor the Bank shall have
received from the Division, the Federal Reserve, or the Commission any
direction (oral or written) to make any change in the method of
conducting their respective businesses which is material to the business
of the Company, the MHC, and the
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 19
Bank, taken as a whole, with which they have not complied; (iv) no
action, suit, or proceeding, at law or in equity or before or by any
federal or state commission, board, or other administrative agency,
shall be pending or threatened against the Company, the MHC, or the Bank
or affecting any of their respective assets, wherein an unfavorable
decision, ruling, or finding would have a Material Adverse Effect on the
Company, the MHC, and the Bank, taken as a whole; and (v) the Shares
shall have been qualified or registered for offering and sale by the
Company under the securities or blue sky laws of such jurisdictions as
Trident and the Company shall have agreed upon.
(e) At the Closing Date, Trident shall receive a certificate of the
principal executive officer and the principal financial officer of each
of the Company, the MHC, and the Bank, dated the Closing Date, to the
effect that: (i) they have examined the Prospectus and the Notice and
Information Statement and, at the time the Prospectus and the Notice and
Information Statement became authorized for use, the Prospectus and the
Notice and Information Statement did not contain an untrue statement of
a material fact or omit to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading with respect to the Company, the MHC, or
the Bank; (ii) since the date the Prospectus and the Notice and
Information Statement became authorized for use, no event has occurred
which should have been set forth in an amendment or supplement to the
Prospectus or the Notice and Information Statement which has not been so
set forth, including specifically, but without limitation, any material
change in the business, financial condition, or results of operations of
the Company, the MHC, or the Bank and, the conditions set forth in
clauses (ii) through (iv) inclusive of subsection (d) of this Section 7
have been satisfied; (iii) to the knowledge of such officers, no order
has been issued by the Commission, the Division, or the Federal Reserve,
to suspend the Subscription Offering or the Community Offering or the
effectiveness of the Prospectus, and no action for such purposes has
been instituted or threatened by the Commission, the Division, or the
Federal Reserve; (iv) to the knowledge of such officers, no person has
sought to obtain review of the final actions of the Division or the
Federal Reserve approving the Plan; and (v) all of the representations
and warranties contained in Section 2 of this Agreement are true and
correct, with the same force and effect as though expressly made on the
Closing Date.
(f) At the Closing Date, Trident shall receive, among other
documents, (i) a copy of the letter from the Division authorizing the
use of the Prospectus, the Notice and Information Statement, and related
materials; (ii) a copy of the order of the Commission declaring the
Registration Statement effective; (iii) copies of the letters from the
Division evidencing the corporate existence of the Bank and the MHC;
(iv) a copy of the letter from the appropriate Massachusetts authority
evidencing the incorporation (and, if generally available from such
authority, good standing) of the Company; (v) a copy of the Company's
articles of incorporation certified by the appropriate Massachusetts
governmental authority; and (vi) a copy of the order of the Federal
Reserve approving the Holding Company Application.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 20
(g) Concurrently with the execution of this Agreement, Trident shall
receive a letter from Wolf & Company, P.C., dated as of the date hereof
and addressed to Trident: (i) such letter confirming that Wolf &
Company, P.C. is a firm of independent public accountants within the
meaning of the Act and the FDIC's securities disclosure regulations and
12 C.F.R. ss. 335.604(a) and no information concerning its relationship
with or interests in the Bank is required by the Division Application,
and stating in effect that, in Wolf & Company, P.C.'s opinion, the
financial statements of the Bank as are included in the Prospectus
comply as to form in all material respects with the applicable
accounting requirements of the Division Regulations, the Act, the SEC
Regulations, and generally accepted accounting principles; (ii) stating
in effect that, on the basis of certain agreed upon procedures (but not
an audit examination in accordance with generally accepted auditing
standards) consisting of a reading of the latest available unaudited
interim financial statements of the Bank, prepared by the Bank, a
reading of the minutes of the Board of Directors and shareholders of the
Bank and consultations with officers of the Bank responsible for
financial and accounting matters, nothing came to their attention which
caused them to believe that: (A) such unaudited financial statements,
including "Recent Developments," are not in conformity with generally
accepted accounting principles applied on a basis substantially
consistent with that of the audited financial statements included in the
Prospectus; (B) during the period from the date of the latest unaudited
financial statements included in the Prospectus to a specified date not
more than three business days prior to the date hereof, there was any
material increase in borrowings, and any other form of debt other than
deposits of the Bank (increases in borrowings will not be deemed to be
material if such increase in total borrowings does not exceed
$1,000,000); (C) there was any decrease in retained earnings of the Bank
at the date of such letter as compared with amounts shown in the latest
unaudited statement of condition included in the Prospectus, including
"Recent Developments;" or (D) there was any decrease in net income or
net interest income of the Bank for the number of full months commencing
immediately after the period covered by the latest unaudited income
statement included in the Prospectus, including "Recent Developments,"
and ended on the latest month end prior to the date of the Prospectus or
such letter as compared to the corresponding period in the preceding
year; and (iii) stating that, in addition to the audit examination
referred to in its opinion included in the Prospectus and the
performance of the procedures referred to in clause (ii) of this
subsection (g), they have compared with the general accounting records
of the Bank, which are subject to the internal controls of the Bank,
accounting system and other data prepared by the Bank, directly from
such accounting records, to the extent specified in such letter, such
amounts and/or percentages set forth in the Prospectus as Trident may
reasonably request; and they have found such amounts and percentages to
be in agreement therewith (subject to rounding).
(h) At the Closing Date, Trident shall receive a letter in form and
substance satisfactory to counsel for Trident from Wolf & Company, P.C.,
independent certified public accountants, dated the Closing Date and
addressed to Trident and the Company, confirming
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 21
the statements made by them in the letter delivered by them pursuant to
the preceding subsection as of a specified date not more than five (5)
days prior to the Closing Date.
All such opinions, certificates, letters, and documents shall be in compliance
with the provisions hereof only if they are satisfactory to Trident and its
counsel in their reasonable opinion. Any certificates signed by an officer or
director of the Company or the Bank prepared for Trident's reliance and
delivered to Trident or to its counsel shall be deemed a representation and
warranty by the Company, the MHC, and the Bank to Trident as to the statements
made therein. If any condition to Trident's obligations hereunder to be
fulfilled prior to or at the Closing Date is not so fulfilled, Trident may
terminate this Agreement or, if Trident so elects, may waive any such conditions
which have not been fulfilled, or may extend the time of their fulfillment. If
Trident terminates this Agreement as aforesaid, the Company, the MHC, and the
Bank shall reimburse Trident for their expenses as provided in Section 3 hereof.
8. Indemnification.
(a) The Company and the Bank, jointly and severally, agree to
indemnify and hold harmless Trident, its officers, directors, and
employees and each person, if any, who controls Trident within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act,
against any and all loss, liability, claim, damage, and expense
whatsoever and shall further promptly reimburse such persons for any
legal or other expenses reasonably incurred by each or any of them in
investigating, preparing to defend, or defending against any such
action, proceeding or claim (whether commenced or threatened) arising
out of or based upon (A) any misrepresentation by the Company, the MHC,
or the Bank in this Agreement or any breach of warranty by the Company,
the MHC, or the Bank with respect to this Agreement or arising out of or
based upon any untrue or alleged untrue statement of a material fact or
the omission or alleged omission of a material fact required to be
stated or necessary to make not misleading any statements contained in
(i) the Registration Statement, the Prospectus, or the Notice and
Information Statement or (ii) any application (including the Division
Application, the Holding Company Application, or other document or
communication (in this Section 8 collectively called the "Applications")
prepared or executed by or on behalf of the Company, the MHC, or the
Bank or based upon written information furnished by or on behalf of the
Company, the MHC, or the Bank, whether or not filed in any jurisdiction,
to effect the Reorganization or qualify the Shares under the securities
laws thereof or filed with the Division, the Federal Reserve, or the
Commission, unless such statement or omission was made in reliance upon
and in conformity with written information furnished to the Company, the
MHC, or the Bank with respect to Trident by or on behalf of Trident
expressly for use in the Prospectus or any amendment or supplement
thereof or in any Application, as the case may be, or (B) the
participation by Trident in the Reorganization. This indemnity shall be
in addition to any liability the Company, the MHC, and the Bank may have
to Trident otherwise.
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 22
(b) The Company and the Bank shall indemnify and hold Trident
harmless for any liability whatsoever arising out of (i) the Allocation
Instructions or (ii) any records of account holders and depositors of
the Bank delivered to Trident by the Bank or its agents for use during
the Reorganization.
(c) Trident agrees to indemnify and hold harmless the Company and
the Bank, their officers, directors, and employees and each person, if
any, who controls the Company and the Bank within the meaning of Section
15 of the Act or Section 20(a) of the Exchange Act, to the same extent
as the foregoing indemnity from the Company and the Bank to Trident, but
only with respect to (A) statements or omissions, if any, made in the
Prospectus or any amendment or supplement thereof, in any Application or
to a purchaser of the Shares in reliance upon Trident, and in conformity
with, written information furnished to the Company or the Bank with
respect to Trident by or on behalf of Trident expressly for use in the
Prospectus or in any Application (provided that it is agreed and
understood that the only information so furnished is set forth in the
Prospectus under the caption "The Offering and the Reorganization - Plan
of Distribution and Selling Commissions;" (B) any misrepresentation by
Trident in Section 2(b) of this Agreement; or (C) any liability of the
Company or the Bank which is found in a final judgment by a court of
competent jurisdiction (not subject to further appeal) to have
principally and directly resulted from gross negligence or willful
misconduct of Trident. It is expressly agreed, however, that Trident
shall not be liable for any loss, liability, claim, damage, or expense
which in the aggregate exceeds the amount paid (excluding reimbursable
expenses) to Trident under this Agreement.
(d) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 8, notify the indemnifying party
of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than under this Section 8. In
case any such action is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with the other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than the reasonable cost of investigation
except as otherwise provided herein. In the event the indemnifying party
elects to assume the defense of any such action and retain counsel
acceptable to the indemnified party, the indemnified party may retain
additional counsel, but shall bear the fees and expenses of such counsel
unless (i) the indemnifying party shall have specifically authorized the
indemnified party to retain such counsel or (ii) the parties to such
suit include such indemnifying party and the indemnified party, and such
indemnified party
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 23
shall have been advised by counsel that one or more material legal
defenses may be available to the indemnified party which may not be
available to the indemnifying party, in which case the indemnifying
party shall not be entitled to assume the defense of such suit
notwithstanding the indemnifying party's obligation to bear the fees and
expenses of such counsel. In no event shall the Company and the Bank be
liable for the fees and expenses of more than one counsel, separate from
its own counsel, for Trident in connection with any one action or
separate but similar or related actions in the same jurisdiction arising
out of the same allegations or circumstances. An indemnifying party
against whom indemnity may be sought shall not be liable to indemnify an
indemnified party under this Section 8 if any settlement of any such
action is effected without such indemnifying party's consent.
[Notwithstanding the provisions of this Section 8, the Bank shall not
provide indemnification to the Company or Trident solely to the extent
that such indemnification would cause the Bank to violate Section 23A or
Section 23B.]
9. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 8 above is for any reason held to be unavailable to the Company, the
Bank, or Trident other than in accordance with its terms, the Company or the
Bank and Trident shall contribute to the aggregate losses, liabilities, claims,
damages, and expenses of the nature contemplated by said indemnity agreement
incurred by the Company or the Bank and Trident (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Bank, on the one hand, and Trident, on the other hand, from the offering of the
Shares or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Bank, on the one hand, and Trident, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Bank, on the one hand, and Trident, on the other hand, shall be deemed to be in
the same proportions as the total proceeds from the Reorganization (before
deducting expenses) received by the Company and the Bank bear to the total fees
received by Trident under this Agreement. The relative fault of the Company and
the Bank, on the one hand, and Trident, on the other hand, shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or the Bank or by
Trident and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
The Company, the Bank, and Trident agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 24
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 9, Trident shall not be required to contribute any
amount in excess of the amount by which fees owed Trident pursuant to this
Agreement exceed the amount of any damages which Trident has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission for which Trident would be provided indemnification under
Section 8 hereof. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation.
10. Survival of Agreements, Representations, and Indemnities. The
respective indemnities of the Company and the Bank and Trident and the
representation and warranties of the Company, the MHC, and the Bank and of
Trident set forth in or made pursuant to this Agreement shall remain in full
force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of Trident or the Company or
the Bank or any controlling person or indemnified party referred to in Section 8
hereof, and shall survive any termination or consummation of this Agreement
and/or the issuance of the Shares, and any legal representative of Trident, the
Company, the Bank, and any such controlling persons shall be entitled to the
benefit of the respective agreements, indemnities, warranties, and
representations.
11. Termination. Trident may terminate this Agreement by giving the
notice indicated below in this Section at any time after this Agreement becomes
effective as follows:
(a) If any domestic or international event or act or occurrence has
materially disrupted the United States securities markets such as to
make it, in Trident's reasonable opinion, impracticable to proceed with
the offering of the Shares; or if trading on the New York Stock Exchange
shall have suspended; or if the United States shall have become involved
in a war or major hostilities; or if a general banking moratorium has
been declared by a state or federal authority which has material effect
on the Bank or the Reorganization; or if a moratorium in foreign
exchange trading by major international associations or persons has been
declared; or if there shall have been a material change in the
capitalization, condition, or business of the Company, the MHC, or the
Bank, or if the Bank shall have sustained a material or substantial loss
by fire, flood, accident, hurricane, earthquake, theft, sabotage, or
other calamity or malicious act, whether or not said loss shall have
been insured; or if there shall have been a material change in the
condition or prospects of the Company, the MHC, or the Bank.
(b) If Trident elects to terminate this Agreement as provided in
this Section 11, the Company and the Bank shall be notified promptly by
Trident by telephone or telegram and confirmed by letter pursuant to
Section 12 hereof.
(c) If this Agreement is terminated for any of the reasons set forth
in subsection (a) above, and to fulfill their obligations, if any,
pursuant to Sections 3(b), 3(c), 3(d), 6, 8(a)
<PAGE>
Trident Securities, Inc.
Sales Agency Agreement
Page 25
and 9 of this Agreement and upon demand, the Company and the Bank shall
pay to Trident the full amount so owing thereunder.
(d) The Bank may terminate the Reorganization in accordance with the
terms of the Plan. Such termination shall be without liability to any
party, except that the Company and the Bank shall be required to fulfill
their obligations, to the extent applicable, pursuant to Sections 3(b),
3(c), 3(d), 6, 8(a) and 9 of this Agreement.
12. Notices. All communications hereunder, except as herein otherwise
specifically provided, shall be in writing and, if sent to Trident, shall be
mailed, delivered, or telegraphed and confirmed to Trident Securities, Inc.,
4601 Six Forks Road, Suite 400, Raleigh, North Carolina 27609, Attention: Mr.
Timothy E. Lavelle (with a copy to Thacher Proffitt & Wood, 1700 Pennsylvania
Avenue, Suite 800, Washington, D.C. 20006, Attention: Richard A. Schaberg, Esq.)
and, if sent to the Company, the MHC, or the Bank, shall be mailed, delivered,
or telegraphed and confirmed to Service Bancorp, Inc., Service Bancorp, MHC, or
Summit Bank, as the case may be, 81 Main Street, Medway, Massachusetts 02053,
Attention: Mr. Eugene G. Stone (with a copy to Luse, Lehman, Gorman, Pomerenk &
Schick, 5335 Wisconsin Avenue, N.W., Suite 400, Washington, D.C. 20015,
Attention: Robert B. Pomerenk, Esq.).
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, Trident, the Company, the MHC, the Bank, and the
controlling and other persons referred to in Section 8 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision herein
contained.
14. Construction. Unless governed by preemptive federal law, this
Agreement shall be governed by and construed in accordance with the substantive
laws of the State of North Carolina.
15. Counterparts. This Agreement may be executed in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
<PAGE>
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company one copy of this letter.
SERVICE BANCORP, INC. SUMMIT BANK
By:_____________________________ By:_____________________________
Eugene G. Stone Eugene G. Stone
President and Chief Executive President and Chief Executive
Officer Officer
Date:___________________________ Date:___________________________
SERVICE BANCORP, MHC
By:_____________________________
[Name]
[Title]
Date:___________________________
Agreed to and accepted:
TRIDENT SECURITIES, INC.
By:_____________________________
Timothy E. Lavelle
Managing Director
Date:___________________________
<PAGE>
EXHIBIT A
Jurisdictions where Trident is a Registered Selling Agent
Trident is a registered selling agent in the jurisdictions listed below:
Alabama Missouri
Arizona Nebraska
Arkansas Nevada
California New Hampshire
Colorado New Jersey
Connecticut New Mexico
Delaware New York
District of Columbia North Carolina
Florida North Dakota (Trident Securities, Inc.
only, no agents)
Georgia Ohio
Idaho Oklahoma
Illinois Oregon
Indiana Pennsylvania
Iowa Rhode Island
Kansas South Carolina
Kentucky Tennessee
Louisiana Texas
Maine Vermont
Maryland Virginia
Massachusetts Washington
Michigan West Virginia
Minnesota Wisconsin
Mississippi Wyoming
Trident is not a registered selling agent in the jurisdictions listed below:
Alaska
Hawaii
Montana
South Dakota
Utah
<PAGE>
EXHIBIT B
Opinion of Luse, Lehman, Gorman, Pomerenk & Schick
Required under Section 7(a) of the Sales Agency Agreement
---------------------------------------------------------
[Luse, Lehman to insert introduction]
(i) the Company is duly incorporated and validly existing as a
corporation in good standing under the laws of the Commonwealth of
Massachusetts, the MHC is duly organized and validly existing as a
mutual holding company in good standing under the laws of the
Commonwealth of Massachusetts, and the Bank is duly incorporated and
validly existing as a stock savings bank in good standing under the laws
of the Commonwealth of Massachusetts; each with full power and authority
to own its properties and conduct its business as described in the
Prospectus;
(ii) the Company, the MHC, and the Bank are each duly qualified to
do business and each are in good standing as a foreign corporation in
each jurisdiction where the ownership or leasing of its properties or
the conduct of its business requires such qualification unless the
failure to be so qualified would not have a Material Adverse Effect on
the Company, the MHC, and the Bank, taken as a whole;
(iii) the Bank is a member of the Federal Home Loan Bank of Boston,
and the deposit accounts of the Bank are insured by the Bank Insurance
Fund of the FDIC, up to the maximum amount permitted by law, and by the
Depositors Insurance Fund in excess of such amount;
(iv) to our knowledge, (a) the Bank has obtained all licenses,
permits, and other governmental authorizations currently required for
the conduct of its business, except where the failure to obtain such
licenses, permits, and other governmental authorizations would not have
a Material Adverse Effect on the Company, the MHC, and the Bank, taken
as a whole; (b) all such licenses, permits, and other governmental
authorizations are in full force and effect; and (c) the Bank is in all
material respects complying therewith;
(v) The Plan complies with and the formation of the Company as the
holding company for the Bank has been effected in all material respects
in accordance with all applicable laws, rules, regulations, decisions,
and orders; all of the terms, conditions, requirements, and provisions
with respect to the Plan and the Reorganization imposed by the Division
and the Federal Reserve, except with respect to the filing or submission
of certain required post-Reorganization reports or other materials by
the Company, the MHC, or the Bank, have been complied with by the
Company, the MHC, and the Bank; and, to our knowledge, no person has
sought to obtain regulatory or judicial review of the final action of
the Division in approving the Plan;
<PAGE>
(vi) As of the Closing Date, the Company has authorized Common Stock
as set forth in the Registration Statement and the Prospectus; the Bank
has authorized the capital stock as set forth in the Division
Application and the Prospectus; and the description of the Common Stock
and the capital stock of the Bank provided in the Registration
Statement, the Prospectus, and the Division Application, as applicable,
is accurate in all material respects;
(vii) the issuance and sale of the Shares have been duly and validly
authorized by all necessary corporate action on the part of the Company
and have received all requisite regulatory approvals; the Shares, upon
receipt of payment and issuance in accordance with the terms of the Plan
and this Agreement, will be validly issued, fully paid, nonassessable,
and, except as disclosed in the Prospectus, free of preemptive rights,
and good title thereto shall be transferred by the Company to the
purchasers free and clear of all claims, encumbrances, security
interests and liens created by the Company;
(viii) the certificates for the Common Stock are in due and proper
form and comply with applicable requirements of Massachusetts law and
the rules and regulations of the Division;
(ix) the issuance and sale of the capital stock of the Bank to the
Company have been duly authorized by all necessary corporate action of
the Bank and the Company and have received the approval of the Division;
and such capital stock, upon receipt of payment and issuance in
accordance with the terms of the Plan, will be validly issued, fully
paid and nonassessable and owned of record and beneficially by the
Company;
(x) subject to the satisfaction of the conditions imposed in the
approvals of the Division Application and the Holding Company
Application, no further approval, authorization, consent, or other order
of any public board or body is required in connection with the execution
and delivery of this Agreement, and the consummation of the
Reorganization, except as may be required under the "blue sky" laws of
various jurisdictions;
(xi) the execution and delivery of this Agreement and the
consummation of the of the transactions contemplated hereby have been
duly and validly authorized by all necessary action, corporate or
otherwise, on the part of each of the Company, the MHC, and the Bank;
and this Agreement is a legal, valid, and binding obligation of each of
the Company, the MHC, and the Bank, enforceable in accordance with its
terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, receivership, conservatorship, or other laws
affecting creditors' rights generally and as my be limited by the
exercise of judicial discretion in applying principles of equity and
except to the extent that the provisions of Sections 8 and 9 hereof may
be unenforceable as against public policy or Section 23A;
(xii) to our knowledge, except as set forth in the Prospectus, there
are no legal or governmental proceedings pending or threatened against
or involving the assets of the Company, the MHC, or the Bank required to
be disclosed in the Prospectus, nor are there any statutes or
regulations, and to our knowledge, any contract or other documents
required
<PAGE>
to be described or disclosed in the Prospectus that are not so described
or disclosed; and the description in the Prospectus of such statutes,
regulations, contracts, and other documents therein described are in all
material respects accurate summaries and in all material respects fairly
present the information required to be shown;
(xiii) the statements in the Prospectus and incorporated by
reference in the Notice and Information Statement under the captions
"Regulation," "Dividend Policy," "Restrictions on Acquisition of the
Stock Company and the Bank," "Description of Capital Stock of the Stock
Company," and "Federal and State Taxation" insofar as they are, or refer
to, statements of law or legal conclusions (excluding financial data
included therein, as to which no opinion is expressed), have been
prepared or reviewed by us and are correct in all material respects;
(xiv) the Division Application has been approved by the Division,
and the Prospectus and the Notice and Information Statement have been
authorized for use by the Division; the Registration Statement and any
post-effective amendment thereto have been declared effective by the
Commission; except as to any necessary qualifications or registration
under the securities laws of the jurisdictions in which the Shares were
offered, no further approval of any governmental authority is required
for the issuance and sale of the Shares (subject to the satisfaction of
various conditions subsequent imposed by the Division in connection with
their approval of the Reorganization); the Division and the Federal
Reserve have issued their orders of approval for the Company to acquire
the Bank; and, to our knowledge, no proceedings are pending by or before
the Commission or the Division seeking to revoke or rescind the orders
declaring the Registration Statement effective or authorizing the
Prospectus or the Notice and Information Statement for use or, to our
knowledge, are contemplated or threatened (provided that for this
purpose we do not regard any litigation or governmental procedure to be
"threatened" unless the potential litigant or government authority has
manifested to the management of the Company or the Bank, or to us, a
present intention to initiate such litigation or proceeding);
(xv) the execution and delivery of this Agreement, the incurring of
the obligations set forth herein, and the consummation of the of the
transactions contemplated hereby shall not conflict with or result in a
breach of the articles of incorporation, charter or bylaws of the
Company, the MHC, or the Bank; nor to our knowledge, constitute a
material breach of or default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or give rise to any
right of termination, cancellation, or acceleration contained in, or
result in the creation or imposition of any lien, charge, or other
encumbrance upon any of the properties or assets of the Company, the
MHC, or the Bank pursuant to any of the terms, provisions, or conditions
of any material agreement, contract, indenture, bond, debenture, note,
instrument, or obligation to which the Company, the MHC, or the Bank is
a party or by which it or its assets or properties may be bound or is
subject, or any governmental license or permit (subject to the
satisfaction of any post-Reorganization conditions imposed by the
Division and/or the Federal Reserve), which in any such event would have
a Material Adverse Effect on the Company, the MHC, and the Bank, taken
as a whole; nor will any such actions violate any material law,
administrative regulation or order, court order, writ,
<PAGE>
injunction, or decree which breach, default, encumbrance, or violation
would have a Material Adverse Effect on the Company, the MHC, and the
Bank, taken as a whole;
(xvi) to our knowledge, there has been no material breach of the
Company's, the MHC's, or the Bank's articles of incorporation, charter,
or bylaws or a breach or default (or the occurrence of any event which,
with the lapse of time or action, or both, by a third party, would
result in a breach or default) under any agreement, contract, indenture,
bond, debenture, note, instrument, or obligation to which the Company,
the MHC, or the Bank is party or by which any of them or their
respective assets or properties may be bound, or any governmental
license or permit, or a violation of any law, administrative regulation,
or order, court order, writ, injunction, or decree which breach or
default would have a Material Adverse Effect on the Company, the MHC,
and the Bank, taken as a whole;
(xvii) the Division Application, the Holding Company Application,
the Registration Statement, the Prospectus, and the Notice and
Information Statement (in each case as amended or supplemented, if so
amended or supplemented) comply as to form in all material respects with
the requirements of all applicable laws and the rules, regulations, and
all written and published decisions and orders of the Division, the
Federal Reserve, and the Commission, as the case may be (except as to
financial statements, notes to financial statements, financial tables,
and other financial and statistical data, including the appraisal,
included therein, as to which no opinion is expressed); all documents
and exhibits required to be filed with the Division Application and the
Registration Statement have been so filed and the descriptions in the
Division Application and the Registration Statement (in each case, as
amended or supplemented, of so amended or supplemented); the description
in the Division Application, the Holding Company Application, and the
Registration Statement of such documents and exhibits is in all material
respects accurate and complete and presents fairly the information
required to be shown; to our actual knowledge, there are no contracts or
other documents of a character required to be described that are not
described, and there are no statutes or regulations applicable to,
certificates, permits, or other authorizations from governmental
regulatory officials or bodies required to be obtained or maintained by,
or legal or governmental proceedings, past, pending, or threatened
against the Company, the MHC, or the Bank of a character required to be
disclosed in the Division Application, the Holding Company Application,
the Registration Statement, or the Prospectus that have not been so
disclosed and properly described therein;
(xviii) to our knowledge, none of the Company, the MHC, nor the Bank
is in violation of any directive from the Division, the FDIC, or the
Federal Reserve to make any change in the method of conducting their
respective businesses; and
(xix) the Company is not required to be registered as an investment
company under the Investment Company Act of 1940 and will not be
required to be so registered as a result of the consummation of the
Reorganization and the receipt and use of the proceeds from the sale of
the Shares, as such use of proceeds is described in the Prospectus under
the caption "Use of Proceeds."
<PAGE>
(xx) None of the Company, the MHC, nor the Bank is required to
obtain the approval or non-objection of the FDIC with respect to the
Plan and the transactions contemplated therein.
[Luse, Lehman to insert conclusion]
<PAGE>
EXHIBIT C
Letter of Luse, Lehman, Gorman, Pomerenk & Schick
Required under Section 7(b) of the Sales Agency Agreement
---------------------------------------------------------
[Luse, Lehman to insert introduction]
Based on such counsel's participation in conferences with
representatives of the Company, the Bank, its counsel, the independent
appraiser, the independent certified public accountants, Trident and its
counsel, review of documents and understanding of applicable law (including the
requirements of Form SB-2 and the character of the Registration Statement
contemplated thereby) and the experience such counsel has gained in its practice
under the Act, nothing has come to such counsel's attention that would lead it
to believe that the Registration Statement, as amended (except as to information
in respect of Trident contained therein and except as to the financial
statements, notes to financial statements, financial tables and other financial
and statistical data contained therein, as to which such counsel expresses no
opinion), at the time it became effective contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading, or that the Prospectus, as amended
(except as to information in respect of Trident contained therein and except as
to financial statements, notes to financial statements, financial tables and
other financial and statistical data contained therein as to which such counsel
expresses no opinion), as of the date of the Prospectus and at the Closing Date,
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading (in making this statement such
counsel may state that it has not undertaken to verify independently the
information in the Registration Statement or Prospectus and, therefore, does not
assume any responsibility for the accuracy or completeness thereof).
[Luse, Lehman to insert conclusion]
ARTICLES OF ORGANIZATION
SERVICE BANCORP, INC.
ARTICLE I. NAME
The exact name of the corporation is: Service Bancorp, Inc.
ARTICLE II. PURPOSE
The purpose of the corporation is to engage in the following business
activities: To buy, sell, deal in, or hold securities of every kind and
description; and in general to carry on any business permitted to corporations
organized under Chapter 156B of the Massachusetts General Laws as now in force
or hereafter amended.
ARTICLE III. AUTHORIZED CAPITAL STOCK
The total number of shares and par value of each class of stock that
the Corporation is authorized to issue is as follows:
Common: 12,000,000 shares, $.01 par value
Preferred: 5,000,000 shares, $.01 par value
ARTICLE IV. CAPITAL STOCK
A description of the different classes and series of the Corporation's
capital stock and a statement of the designations, and the relative rights,
preferences and limitations of the shares of each class and series of capital
stock are as follows:
A. Common Stock. Except as provided by law or in this ARTICLE IV
(or in any certificate of establishment of series of preferred stock),
holders of the Common Stock shall exclusively possess all voting
power. Each holder of shares of Common Stock shall be entitled to one
vote on all matters for each share held by such holder. There shall be
no cumulative voting rights in the election of Directors.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the Common Stock as to the payment of dividends, the full amount
of dividends and of sinking fund, retirement fund or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
Common Stock, then dividends may be paid on the Common Stock and on any class or
series of stock entitled to participate therewith as to dividends, out of any
assets legally available for the payment of dividends; but only when and as
declared by the Board of Directors.
-1-
<PAGE>
In the event of any liquidation, dissolution or winding up of the
Corporation, after there shall have been paid to or set aside for the holders of
any class having preferences over the Common Stock in the event of liquidation,
dissolution or winding up of the full preferential amounts of which they are
respectively entitled, the holders of the Common Stock, and of any class or
series of stock entitled to participate therewith, in whole or in part, as to
distribution of assets, shall be entitled, after payment or provision for
payment of all debts and liabilities of the Corporation, to receive the
remaining assets of the Corporation available for distribution, in cash or in
kind, in proportion to their holdings.
Each share of Common Stock shall have the same relative rights as, and
be identical in all respects with, all the other shares of Common Stock.
B. Preferred Stock. Subject to any limitations prescribed by law,
the Board of Directors of the Corporation is authorized, by vote or
votes from time to time adopted, to provide for the issuance of one or
more classes of preferred stock, which shall be separately identified.
The Board of Directors shall have the authority to divide any
authorized class of preferred stock of the Corporation into one or
more series, to establish or change from time to time the number of
shares to be included in each such series, and to fix and state the
voting powers, designations, preferences and relative, participating,
optional or other special rights of the shares of any series so
established and the qualifications, limitations and restrictions
thereof. Each series shall be separately designated so as to
distinguish the shares thereof from the shares of all other series and
classes. The authority of the Board of Directors with respect to each
series shall include, but not be limited to, determination of one or
more of the following:
1. The distinctive serial designation and the number of shares
constituting such series;
2. The dividend rates or the amount of dividends to be paid on
the shares of such series, whether dividends shall be
cumulative and, if so, from which date or dates, the payment
date or dates for dividends, and the participating or other
special rights, if any, with respect to dividends;
3. The voting powers, full or limited, if any, of shares of
such series;
4. Whether the shares of such series shall be redeemable and,
if so, the price or prices at which, and the terms and
conditions on which, such shares may be redeemed;
5. The amount or amounts payable upon the shares of such series
in the event of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
6. Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the
purchase or redemption of such shares, and if so entitled,
the amount of such fund and the manner of its application,
-2-
<PAGE>
including the price or prices at which such shares may be
redeemed or purchased through the application of such fund;
7. Whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes or
of any other series of the same or any other class or
classes of stock of the Corporation, and if so convertible
or exchangeable, the conversion price or prices or the rate
or rates of exchange, and the adjustments thereof, if any,
at which such conversion or exchange may be made, and any
other terms and conditions of such conversion or exchange;
8. The price or other consideration for which the shares of
such series shall be issued;
9. Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued
shares of preferred stock and whether such shares may be
reissued as shares of the same or any other series of stock;
and
10. Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as are permitted by law
and as the Board of Directors of the Corporation may deem
advisable.
Any such vote shall become effective when the Corporation files with
the Secretary of State of The Commonwealth of Massachusetts a certificate of
establishment of one or more series of preferred stock signed by the President
or any Vice President and by the Clerk, Assistant Clerk, Secretary or Assistant
Secretary of the Corporation, setting forth a copy of the vote of the Board of
Directors establishing and designating the series and fixing and determining the
relative rights and preferences thereof, the date of adoption of such vote and a
certification that such vote was duly adopted by the Board of Directors.
Each share of each series of preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
Subject to the authority of the Board of Directors as set forth in
Paragraph 9 above, any shares of Preferred Stock shall, upon reacquisition
thereof by the Corporation, be restored to the status of authorized but unissued
Preferred Stock under this Section B.
Except as specifically provided in these Articles, the holders of
Preferred Stock or Common Stock shall not be entitled to any vote and shall not
have any voting rights concerning the designation or issuance of any shares of
Preferred Stock authorized by and complying with the conditions of these
Articles, and subject to the authority of the Board of Directors or any
authorized committee thereof as set forth above, the right to any such vote is
expressly waived by all present and future holders of the capital stock of the
Corporation.
-3-
<PAGE>
ARTICLE V. RESTRICTIONS ON TRANSFER OF SHARES
The restrictions, if any, imposed by these Articles upon the transfer
of shares of any class are: None.
ARTICLE VI. OTHER LAWFUL PROVISIONS
6.1 Corporate Governance
The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Directors and stockholders:
A. The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors. In addition to
the powers and authority expressly conferred upon them by statute or
by these Articles or the Bylaws of the Corporation, the Directors are
hereby empowered to exercise all such powers and do all such acts and
things as may be exercised or done by the Corporation.
B. The Directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide or unless so requested by
a stockholder entitled to vote thereon.
C. Any action to be taken by the stockholders of the Corporation
must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by the
unanimous consent in writing by such stockholders.
D. Special meetings of stockholders of the Corporation may be
called only by the Board of Directors pursuant to a resolution adopted
by a majority of the total number of authorized directorships (whether
or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the
Board for adoption) (the "Whole Board"), (provided, however, that if
there is an Interested Stockholder (as defined in Section C of Section
6.4), any such call by the Board of Directors shall also require the
affirmative vote of a majority of the Disinterested Directors (as
defined in Section C of Section 6.4) then in office). Special meetings
shall be called by the Clerk, or in the case of the death, absence,
incapacity or refusal of the Clerk, by any other officer, upon written
application of one or more stockholders who hold at least 80% in
interest of the capital stock entitled to vote at such meeting.
Application to a court pursuant to Section 34(b) of Chapter 156B (the
"Massachusetts Business Corporation Law") of the General Laws of The
Commonwealth of Massachusetts (or successor provisions) requesting the
call of a special meeting of stockholders because none of the officers
is able and willing to call such a meeting may be made only by
stockholders who hold at least 80% in interest of the capital stock
entitled to vote at such meeting. At a special meeting of
stockholders, only such business shall be conducted, and only such
proposals shall be acted upon, as shall have been stated in the
written notice of the special meeting, unless otherwise provided by
law.
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6.2 Directors
A. The number of Directors shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted
by a majority of the Whole Board. The Directors shall be divided into
three classes, with the term of office of the first class to expire at
the first annual meeting of stockholders, the term of office of the
second class to expire at the annual meeting of stockholders one year
thereafter and the term of office of the third class to expire at the
annual meeting of stockholders two years thereafter. At each annual
meeting of stockholders following such initial classification and
election, Directors elected to succeed those Directors whose terms
expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election.
B. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, newly created directorships
resulting from any increase in the authorized number of Directors or
any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or
other cause may be filled only by a majority vote of the Directors
then in office, though less than a quorum (provided, however, that if
there is an Interested Stockholder, any such action by the Board of
Directors shall also require the affirmative vote of a majority of the
Disinterested Directors then in office), and Directors so chosen shall
hold office for a term expiring at the annual meeting of stockholders
at which the term of office of the class to which they have been
chosen expires. No decrease in the number of Directors constituting
the Board of Directors shall shorten the term of any incumbent
Director.
C. Advance notice of stockholder nominations for the election of
Directors and of business to be brought by stockholders before any
meeting of the stockholders of the Corporation shall be given in the
manner provided in the Bylaws of the Corporation.
D. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any Director, or the entire Board of
Directors, may be removed from office at any time, but only for cause
and only by the affirmative vote of the holders of at least 80% of the
voting power of all of the then-outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of
Directors, voting together as a single class. At least 30 days prior
to such meeting of stockholders, written notice shall be sent to the
Director whose removal will be considered at the meeting and the
Director will be provided an opportunity to be heard before the
stockholders.
6.3 Amendment to Bylaws. The Board of Directors is expressly empowered
to adopt, amend or repeal the Bylaws of the Corporation. Any adoption, amendment
or repeal of the Bylaws of the Corporation by the Board of Directors shall
require the approval of a majority of the Whole Board (unless at the time of
such action there shall be an Interested Stockholder, in which case such action
shall require the affirmative vote of a majority of the Disinterested Directors
then in office at such meeting). The stockholders shall also have power to
adopt, amend or repeal the Bylaws of the Corporation; provided, however, that,
in addition to any vote of the holders of any class or series of stock of the
Corporation required by law or by these Articles, the affirmative vote of the
holders of at least 80% of the voting power of all of the then-outstanding
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shares of the capital stock of the Corporation entitled to vote generally in the
election of Directors, voting together as a single class, shall be required to
adopt, amend or repeal any provisions of the Bylaws of the Corporation.
6.4 Certain Business Combinations
A. In addition to any affirmative vote required by law or these
Articles, and except as otherwise expressly provided in this Section
6.4:
1. any merger or consolidation of the Corporation or any
Subsidiary (as defined in Section C of this Section 6.4) with (i)
any Interested Stockholder (as defined in Section C of this
Section 6.4), or (ii) any other corporation (whether or not
itself an Interested Stockholder) which is, or after such merger
or consolidation would be, an Affiliate (as defined in Section C
of this Section 6.4) of an Interested Stockholder; or
2. any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of
transactions) to or with any Interested Stockholder, or any
Affiliate of any Interested Stockholder, of any assets of the
Corporation or any Subsidiary having an aggregate Fair Market
Value (as herein defined in Section C of this Section 6.4)
equaling or exceeding 25% or more of the combined assets of the
Corporation and its Subsidiaries; or
3. the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of
any securities of the Corporation or any Subsidiary to any
Interested Stockholder or any Affiliate of any Interested
Stockholder in exchange for cash, securities or other property
(or a combination thereof) having an aggregate Fair Market Value
(as defined in Section C of this Section 6.4) equaling or
exceeding 25% of the combined Fair Market Value of the
outstanding Common Stock of the Corporation and its Subsidiaries,
except for any issuance or transfer pursuant to an employee
benefit plan of the Corporation or any Subsidiary thereof
(established with the approval of a majority of the Disinterested
Directors then in office); or
4. the adoption of any plan or proposal for the liquidation
or dissolution of the Corporation proposed by or on behalf of an
Interested Stockholder or any Affiliate of any Interested
Stockholder; or
5. any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any other transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder or any Affiliate of any Interested
Stockholder;
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shall require the affirmative vote of the holders of at least 80%
of the voting power of the then-outstanding shares of stock of
the Corporation entitled to vote in the election of Directors
(the "Voting Stock"), voting together as a single class. Such
affirmative vote shall be required notwithstanding the fact that
no vote may be required, or that a lesser percentage may be
specified, by law or by any other provisions of these Articles or
any Certificate of Establishment or in any agreement with any
national securities exchange or otherwise.
The term "Business Combination" as used in this Section 6.4 shall mean
any transaction which is referred to in any one or more of paragraphs 1 through
5 of Section A of this Section 6.4.
B. The provisions of Section A of this Section 6.4 shall not be
applicable to any particular Business Combination, and such Business
Combination shall require only the affirmative vote of the majority of
the outstanding shares of capital stock entitled to vote, or such vote
(if any), as is required by law or by these Articles, if, in the case
of any Business Combination that does not involve any cash or other
consideration being received by the stockholders of the Corporation
solely in their capacity as stockholders of the Corporation, the
condition specified in the following paragraph 1 is met or, in the
case of any other Business Combination, all of the conditions
specified in either of the following paragraphs 1 or 2 are met:
1. The Business Combination shall have been approved by a
majority of the Disinterested Directors (as defined in Section C
of this Section 6.4) then in office.
2. All of the following conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business
Combination of consideration other than cash to be received per
share by the holders of Common Stock in such Business Combination
shall at least be equal to the higher of the following
(1) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage commissions,
transfer taxes and soliciting dealers' fees, paid by the
Interested Stockholder or any of its Affiliates for any
shares of Common Stock acquired by it (i) within the
two-year period immediately prior to the first public
announcement of the proposal of the Business Combination
(the "Announcement Date"), or (ii) in the transaction in
which it became an Interested Stockholder, whichever is
higher.
(2) the Fair Market Value per share of Common Stock on
the Announcement Date or on the date on which the Interested
Stockholder became an Interested Stockholder (such latter
date is referred to in this Section 6.4 as the
"Determination Date"), whichever is higher.
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(b) The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business
Combination of consideration other than cash to be received per
share by holders of shares of any class of outstanding Voting
Stock other than Common Stock shall be at least equal to the
highest of the following (it being intended that the requirements
of this subparagraph (b) shall be required to be met with respect
to every such class of outstanding Voting Stock, whether or not
the Interested Stockholder has previously acquired any shares of
a particular class of Voting Stock):
(1) (if applicable) the Highest Per Share Price (as
hereinafter defined), including any brokerage commissions,
transfer taxes and soliciting dealers' fees, paid by the
Interested Stockholder for any shares of such class of
Voting Stock acquired by it (i) within the two-year period
immediately prior to the Announcement Date, or (ii) in the
transaction in which it became an Interested Stockholder,
whichever is higher;
(2) (if applicable) the highest preferential amount per
share to which the holders of shares of such class of Voting
Stock are entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation; and
(3) the Fair Market Value per share of such class of
Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher.
(c) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including Common
Stock) shall be in cash or in the same form as the Interested
Stockholder has previously paid for shares of such class of
Voting Stock. If the Interested Stockholder has paid for shares
of any class of Voting Stock with varying forms of consideration,
the form of consideration to be received per share by holders of
shares of such class of Voting Stock shall be either cash or the
form used to acquire the largest number of shares of such class
of Voting Stock previously acquired by the Interested
Stockholder. The price determined in accordance with subparagraph
B.2 of this Section 6.4 shall be subject to appropriate
adjustment in the event of any stock dividend, stock split,
combination of shares or similar event.
(d) After such Interested Stockholder has become an
Interested Stockholder and prior to the consummation of such
Business Combination: (1) except as approved by a majority of the
Disinterested Directors (as defined in Section C of this Section
6.4) then in office, there shall have been no failure to declare
and pay at the regular date therefor any full quarterly dividends
(whether or not cumulative) on any outstanding stock having
preference over the Common Stock as to dividends or liquidation;
(2) there shall have been (i)
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no reduction in the annual rate of dividends paid on the Common
Stock (except as necessary to reflect any subdivision of the
Common Stock), except as approved by a majority of the
Disinterested Directors then in office, and (ii) an increase in
such annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which
has the effect of reducing the number of outstanding shares of
the Common Stock, unless the failure to so increase such annual
rate is approved by a majority of the Disinterested Directors
then in office, and (3) neither such Interested Stockholder or
any of its Affiliates shall have become the beneficial owner of
any additional shares of Voting Stock except as part of the
transaction which results in such Interested Stockholder becoming
an Interested Stockholder.
(e) After such Interested Stockholder has become an
Interested Stockholder, such Interested Stockholder shall not
have received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided, directly or indirectly,
by the Corporation, whether in anticipation of or in connection
with such Business Combination or otherwise.
(f) A proxy or information statement describing the proposed
Business Combination and complying with the requirements of the
Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (or any subsequent provisions replacing
such Act, and the rules or regulations thereunder) shall be
mailed to stockholders of the Corporation at least 30 days prior
to the consummation of such Business Combination (whether or not
such proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions).
C. For the purposes of Section 6.1 and this Section 6.4:
1. A "Person" shall include an individual, a group acting in
concert, a corporation, a partnership, an association, a joint
venture, a pool, a joint stock company, a trust, an unincorporated
organization or similar company, a syndicate or any other group formed
for the purpose of acquiring, holding or disposing of securities or
any other entity.
2. "Interested Stockholder" shall mean any person (other than the
Corporation or any Holding Company or Subsidiary thereof) who or
which:
(a) is the beneficial owner, directly or indirectly, of more
than 5% of the outstanding Voting Stock; or
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(b) is an Affiliate of the Corporation and at any time
within the two-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly, of 5%
or more of the voting power of the then outstanding Voting Stock;
or
(c) is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the two-year
period immediately prior to the date in question beneficially
owned by any Interested Stockholder, if such assignment or
succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the
meaning of the Securities Act of 1933, as amended.
3. "Beneficial ownership" shall be determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Securities
Exchange Act of 1934 (or any successor rule or statutory provision),
or, if said Rule 13d-3 shall be rescinded and there shall be no
successor rule or statutory provision thereto, pursuant to said Rule
13d-3 as in effect on the date of filing of these Articles; provided,
however, that a person shall, in any event, also be deemed the
"beneficial owner" of any Common Stock:
(a) which such person or any of its affiliates beneficially
owns, directly or indirectly; or
(b) which such person or any of its affiliates has (i) the
right to acquire (whether such right is exercisable immediately
or only after the passage of time), pursuant to any agreement,
arrangement or understanding (but shall not be deemed to be the
beneficial owner of any voting shares solely by reason of an
agreement, contract, or other arrangement with this Corporation
to effect any transaction which is described in any one or more
clauses of Section A of Section 6.4) or upon the exercise of
conversion rights, exchange rights, warrants, or options or
otherwise, or (ii) sole or shared voting or investment power with
respect thereto pursuant to any agreement, arrangement,
understanding, relationship or otherwise (but shall not be deemed
to be the beneficial owner of any voting shares solely by reason
of a revocable proxy granted for a particular meeting of
stockholders, pursuant to a public solicitation of proxies for
such meeting, with respect to shares of which neither such person
nor any such affiliate is otherwise deemed the beneficial owner);
or
(c) which are beneficially owned, directly or indirectly, by
any other person with which such first mentioned person or any of
its affiliates acts as a partnership, limited partnership,
syndicate or other group pursuant to any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of this Corporation;
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and provided further, however, that (1) no Director or Officer of
this Corporation (or any affiliate of any such Director or
Officer) shall, solely by reason of any or all of such Directors
or Officers acting in their capacities as such, be deemed, for
any purposes hereof, to beneficially own any Common Stock
beneficially owned by another such Director or Officer (or any
affiliate thereof, and (2) neither any employee stock ownership
plan or similar plan of this Corporation or any subsidiary of
this Corporation, nor any trustee with respect thereto or any
affiliate of such trustee (solely by reason of such capacity of
such trustee), shall be deemed, for any purposes hereof, to
beneficially own any Common Stock held under any such plan. For
purposes of computing the percentage beneficial ownership of
Common Stock of a person, the outstanding Common Stock shall
include shares deemed owned by such person through application of
this subsection but shall not include any other Common Stock
which may be issuable by this Corporation pursuant to any
agreement, or upon exercise of conversion rights, warrants or
options, or otherwise. For all other purposes, the outstanding
Common Stock shall include only Common Stock then outstanding and
shall not include any Common Stock which may be issuable by this
Corporation pursuant to any agreement, or upon the exercise of
conversion rights, warrants or options, or otherwise.
4. "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, as
in effect on the date of filing of these Articles.
5. "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the
definition of Interested Stockholder set forth in Paragraph 2 of this
Section C, the term "Subsidiary" shall mean only a corporation of
which a majority of each class of equity security is owned, directly
or indirectly, by the Corporation.
6. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Stockholder and was
a member of the Board of Directors prior to the time that the
Interested Stockholder became an Interested Stockholder, and any
Director who is thereafter chosen to fill any vacancy of the Board of
Directors or who is elected and who, in either event, is unaffiliated
with the Interested Stockholder and in connection with his initial
assumption of office is recommended for appointment or election by a
majority of Disinterested Directors then in office.
7. "Fair Market Value" means:
(a) in the case of stock, the highest closing sales price of
the stock during the 30-day period immediately preceding the date
in question of a share of such stock on the National Association
of Securities Dealers Automated
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Quotation System or any system then in use, or, if such stock is
admitted to trading on a principal United States securities
exchange registered under the Securities Exchange Act of 1934, as
amended, Fair Market Value shall be the highest sale price
reported during the 30-day period preceding the date in question,
or, if no such quotations are available, the Fair Market Value on
the date in question of a share of such stock as determined by
the Board of Directors in good faith, in each case with respect
to any class of stock, appropriately adjusted for any dividend or
distribution in shares of such stock or any stock split or
reclassification of outstanding shares of such stock into a
greater number of shares of such stock or any combination or
reclassification of outstanding shares of such stock into a
smaller number of shares of such stock, and
(b) in the case of property other than cash or stock, the
Fair Market Value of such property on the date in question as
determined by the Board of Directors in good faith.
8. Reference to "Highest Per Share Price" shall in each case with
respect to any class of stock reflect an appropriate adjustment for
any dividend or distribution in shares of such stock or any stock
split or reclassification of outstanding shares of such stock into a
greater number of shares of such stock or any combination or
reclassification of outstanding shares of such stock into a smaller
number of shares of such stock.
9. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration other than cash to be
received" as used in Subparagraphs (a) and (b) of Paragraph 2 of
Section B of this Section 6.4 shall include the shares of Common Stock
and/or the shares of any other class of outstanding Voting Stock
retained by the holders of such shares.
D. A majority of the Directors of the Corporation then in office
(provided, however, that if there is an Interested Stockholder, any such
determination shall also require the affirmative vote of a majority of the
Disinterested Directors then in office) shall have the power and duty to
determine for the purposes of this Section 6.4, on the basis of information
known to them after reasonable inquiry: (a) whether a person is an Interested
Stockholder; (b) the number of shares of Voting Stock beneficially owned by any
person; (c) whether a person is an Affiliate or Associate of another; and (d)
whether the assets which are the subject of any Business Combination have, or
the consideration to be received for the issuance or transfer of securities by
the Corporation or any Subsidiary in any Business Combination has, an aggregate
Fair Market Value equaling or exceeding 25% of the combined Fair Market Value of
the Common Stock of the Corporation and its Subsidiaries. A majority of the
Disinterested Directors then in office shall have the further power to interpret
all of the terms and provisions of this Section 6.4.
E. Nothing contained in the Section 6.4 shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
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F. Notwithstanding any other provisions of these Articles or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock required by law, these Articles or any Certificate of
Establishment, the affirmative vote of the holders of at least 80% of the voting
power of all of the then-outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal this Section 6.4.
6.5 Standards for Board of Directors' Evaluation of Offers. The Board
of Directors of the Corporation, in determining whether the interests of the
Corporation and its stockholders will be served by any offer of another Person
(as defined in Section 6.4) to (i) make a tender or exchange offer for any
equity security of the Corporation, (ii) merge or consolidate the Corporation
with or into another institution, or (iii) purchase or otherwise acquire all or
substantially all of the properties and assets of the Corporation, may consider
the interests of the Corporation's employees, suppliers, creditors and
customers, the economy of the state, region and nation, community and societal
considerations, and the long-term and short-term interests of the Corporation
and its stockholders, including the possibility that these interests may be best
served by the continued independence of the Corporation.
6.6 Indemnification
A. Each person who was or is made a party or is threatened to be made
a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he is or was a Director or an
Officer of the Corporation or is or was serving at the request of the
Corporation as a Director, Officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to an employee benefit plan (hereinafter an
"indemnitee"), whether the basis of such proceeding is alleged action in an
official capacity as a Director, Officer, employee or agent or in any other
capacity while serving as a Director, Officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Massachusetts Business Corporation Law, as the same
exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid in settlement) reasonably incurred or suffered
by such indemnitee in connection therewith; provided, however, that, except
as provided in Section C hereof with respect to proceedings to enforce
rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by
such indemnitee only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation.
B. The right to indemnification conferred in Section A of this Section
6.6 shall include, in the case of a Director or officer at the level of
Vice President or above, and in the case of any other Officer or any
employee may include (in the discretion of the Board of Directors), the
right to be paid by the Corporation the expenses incurred in defending any
such proceeding
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in advance of its final disposition (hereinafter an "advancement of
expenses"). Notwithstanding the foregoing, expenses incurred by an
indemnitee in advance of the final disposition of a proceeding may be paid
only upon the Corporation's receipt of an undertaking by the indemnitee to
repay such payment if he shall be adjudicated or determined to be not
entitled to indemnification under applicable law. The Corporation may
accept such undertaking without reference to the financial ability of the
Indemnitee to make such repayment. The rights to indemnification and to the
advancement of expenses conferred in Sections A and B of this Section 6.6
shall be contract rights and such rights shall continue as to an indemnitee
who has ceased to be a Director, Officer, employee or agent and shall inure
to the benefit of the indemnitee's heirs, executors and administrators.
C. If a claim under Section A or B of this Section 6.6 is not paid in
full by the Corporation within sixty days after a written claim has been
received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be
twenty days, the indemnitee may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim. If successful in
whole or in part in any such suit, or in a suit brought by the Corporation
to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee also shall be entitled to be paid the expense
of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a
suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) in any suit by the
Corporation to recover an advancement of expenses pursuant to the terms of
an undertaking the Corporation shall be entitled to recover such expenses
upon a final adjudication that, he shall not have acted in good faith in
the reasonable belief that his action was in the best interests of the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification
of the indemnitee is proper in the circumstances because the indemnitee has
met the applicable standard of conduct set forth in the Massachusetts
Business Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by
the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right to indemnification or to an advancement of
expenses hereunder, or by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the burden of proving
that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Section 6.6 or otherwise, shall be on
the Corporation.
D. The rights to indemnification and to the advancement of expenses
conferred in this Section 6.6 shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, the
Corporation's Articles, Bylaws, agreement, vote of stockholders or
disinterested Directors or otherwise.
E. The Corporation may maintain insurance, at its expense, to protect
itself and any Director, Officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the
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Corporation would have the power to indemnify such person against such
expense, liability or loss under the Massachusetts Business Corporation
Law.
F. The Corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Section 6.6 with respect to the
indemnification and advancement of expenses of Directors and Officers of
the Corporation. Without limiting the generality of the foregoing, the
Corporation may enter into specific agreements, commitments or arrangements
for indemnification on any terms not prohibited by law which it deems to be
appropriate.
G. If the Corporation is merged into or consolidated with another
corporation and the Corporation is not the surviving corporation, the
surviving Corporation shall assume the obligations of the Corporation under
this Section 6.6 with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or
facts occurring at or prior to the date of such merger or consolidation.
6.7 Limitation of Liability of Directors.
A. No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director notwithstanding any provision of law imposing
such liability; provided, however, that this Section 6.7 shall not
eliminate or limit any liability of a Director (i) for any breach of the
Director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Sections 61 or 62 of Chapter
156B of the General Laws of the Commonwealth of Massachusetts, or (iv) with
respect to any transaction from which the Director derived an improper
personal benefit.
B. No amendment or repeal of this Section 6.7 shall adversely affect
the rights and protection afforded to a Director of this Corporation under
this Section 6.7 for acts or omissions occurring prior to such amendment or
repeal. If the Massachusetts Business Corporation Law is hereafter amended
to further eliminate or limit the personal liability of Directors or to
authorize corporate action to further eliminate or limit such liability,
then the liability of the Directors of this Corporation shall be eliminated
or limited to the fullest extent permitted by the Massachusetts Business
Corporation Law as so amended.
6.8 Transactions with Interested Persons
A. Unless entered into in bad faith, no contract or transaction by the
Corporation shall be void, voidable or in any way affected by reason of the
fact that it is with an Interested Person.
B. For the purposes of this Section 6.8, "Interested Person" means any
person or organization in any way interested in the Corporation whether as
a director, officer, stockholder,
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employee or otherwise, and any other entity in which any such person or
organization of the Corporation is in any way interested.
C. Unless such contract or transaction was entered into in bad faith,
no Interested Person, because of such interest, shall be liable to the
Corporation or to any other person or organization for any loss or expense
incurred by reason of such contract or transaction or shall be accountable
for any gain or profit realized from such contract or transaction.
D. The provisions of this Section 6.8 shall be operative
notwithstanding the fact that the presence of an Interested Person was
necessary to constitute a quorum at a meeting of Directors or stockholders
of the Corporation at which such contract or transaction was authorized or
that the vote of an Interested Person was necessary for the authorization
of such contract or transaction.
6.9 Acting as a Partner
The Corporation may be a partner in any business enterprise which it
would have power to conduct by itself.
6.10 Stockholders' Meetings
Meetings of stockholders may be held at such place in The Commonwealth
of Massachusetts or, if permitted by applicable law, elsewhere in the United
States as the Board of Directors may determine.
6.11 Ownership of Voting Stock by Mutual Holding Company
At all times so long as Service Bancorp, MHC (the "Mutual Holding
Company"), the majority holder of the Corporation's Common Stock, shall be in
existence, the Mutual Holding Company shall own at least a majority of the
Voting Stock of the Corporation and the Corporation shall not be authorized to
issue any shares of Voting Stock or take any action while the Mutual Holding
Company is in existence if after such issuance or action the Mutual Holding
Company shall own less than the majority of the Corporation's Voting Stock. For
these purposes, "Voting Stock" means Common Stock or preferred stock, or similar
interests if the shares by statute, charter or in any manner, entitle the
holder: (i) to vote for or to select directors of the Corporation; and (ii) to
vote on or to direct the conduct of the operations or other significant policies
of the Corporation. Notwithstanding anything in the preceding sentence,
preferred stock is not "Voting Stock" if: (i) voting rights associated with the
preferred stock are limited solely to the type customarily provided by statute
with regard to matters that would significantly and adversely affect the rights
or preferences of the preferred stock, such as the issuance of additional
amounts or classes of senior securities, the modification of the terms of the
preferred stock, the dissolution of the Corporation, or the payment of dividends
by the Corporation when preferred dividends are in arrears; (ii) the preferred
stock represents an essentially passive investment or financing device and does
not otherwise provide the holder with control over the Corporation; and (iii)
the preferred stock does not at the time entitle the holder, by statute,
charter, or otherwise,
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to select or to vote for the selection of directors of the Corporation.
Notwithstanding anything in the preceding two sentences, "Voting Stock" shall be
deemed to include preferred stock and other securities that, upon transfer or
otherwise, are convertible into Voting Stock or exercisable to acquire Voting
Stock where the holder of the stock, convertible security or right to acquire
Voting Stock has the preponderant economic risk in the underlying Voting Stock.
Securities immediately convertible into Voting Stock at the option of the holder
without payment of additional consideration shall be deemed to constitute the
Voting Stock into which they are convertible; other convertible securities and
rights to acquire Voting Stock shall not be deemed to vest the holder with the
preponderant economic risk in the underlying Voting Stock if the holder has paid
less than 50% of the consideration required to directly acquire the Voting Stock
and has no other economic interest in the underlying Voting Stock.
6.12 Conversion Transaction
A. In the event that the Mutual Holding Company elects to convert to
stock form in accordance with applicable law and regulation (a "Conversion
Transaction"), the Mutual Holding Company or its successor may merge or
combine with the Corporation, Summit Bank (the "Bank"), the Corporation's
wholly-owned subsidiary or any other corporation formed or controlled by
the Mutual Holding Company or the Corporation, and the depositors of the
Bank will receive the right to subscribe for a number of shares of Common
Stock of the surviving or resulting corporation determined as set forth in
the Stock Issuance Plan (the "Plan") of the Bank and the Mutual Holding
Company. The additional shares of Common Stock of the Corporation issued in
the Conversion Transaction shall be sold at their aggregate pro forma
market value. Pursuant to the Plan, in any Conversion Transaction, the
minority stockholders of the Corporation (who consist of the holders of
Common Stock other than the Mutual Holding Company), will be entitled to
maintain the same percentage ownership interest in the Common Stock of the
Corporation (or the resulting corporation) after the Conversion Transaction
as their ownership interest in the Common Stock of the Corporation
immediately prior to the Conversion Transaction, subject only to adjustment
(if required by federal or state law, regulation, or regulatory policy) to
reflect (i) the cumulative effect of the aggregate amount of dividends
waived by the Mutual Holding Company, (ii) the market value of assets of
the Mutual Holding Company (other than Common Stock of the Corporation) and
(iii) any other factors required by applicable law.
B. At the sole discretion of the Board of Trustees of the Mutual
Holding Company and the Board of Directors of the Corporation, a Conversion
Transaction may be effected in any other manner necessary to qualify the
Conversion Transaction as a tax-free reorganization under applicable
federal and state tax laws, provided such Conversion Transaction does not
diminish the rights and ownership interest of Minority Stockholders as set
forth in the preceding paragraphs of this Section 6.12. If a Conversion
Transaction does not occur, the Mutual Holding Company will always own a
majority of the Voting Stock of the Corporation.
6.13 Amendment to Articles of Organization.
These Articles may be amended at a duly constituted meeting of
stockholders called expressly for such purpose, by the affirmative vote of at
least 80% of the total votes eligible to be
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cast by stockholders on such amendment, voting together as a single class;
provided, however, that if the Board of Directors recommends, by the affirmative
vote of at least two thirds of the Directors then in office at a duly
constituted meeting of the Board of Directors (unless at any time within the 60
day period immediately preceding the meeting at which the stockholder vote is to
be taken, there shall be an Interested Stockholder, in which case such action
shall also require the affirmative vote of a majority of the Disinterested
Directors then in office), that stockholders approve such amendment at such
meeting of stockholders, such amendment shall only require the affirmative vote
of a majority of the total votes eligible to be cast by stockholders on such
amendment, voting together as a single class.
ARTICLE VII. EFFECTIVE DATE
The effective date of organization of the Corporation shall be the date
approved and filed by the Secretary of the Commonwealth.
ARTICLE VIII. DIRECTORS AND OFFICERS
The information contained in Article VIII is not a permanent part of
the Articles of Organization.
a. The street address of the principal office of the Corporation in
Massachusetts is: 81 Main Street, Medway, Massachusetts 02053
b. The name, residential address and post office address of each Director and
Officer of the Corporation is as follows:
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
---- ------------------- -------------------
President: Eugene G. Stone 151 King Street Franklin, MA 02038
Treasurer: Warren W. Chase 40 Clements Road Waltham, MA 02154
Clerk: James W. Murphy 234 Orchard Street Millis, MA 02054
Director: Eugene G. Stone 151 King Street Franklin, MA 02038
c. The fiscal year (i.e., tax year) of the Corporation shall end on the last
day of the month of: June
d. The name and business address of the resident agent, if any, of the
Corporation is: NONE
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ARTICLE IX. BYLAWS
Bylaws of the Corporation have been duly adopted and the President,
Treasurer, Clerk and Directors whose names are set forth above, have been duly
elected.
IN WITNESS WHEREOF AND UNDER THE PAINS AND PENALTIES OF PERJURY, I/we, whose
signature(s) appear below as incorporator(s) and whose name(s) and business or
residential address(es) are clearly typed or printed beneath each signature do
hereby associate with the intention of forming this Corporation under the
provisions of General Laws, Chapter 156B and do hereby sign these Articles of
Organization as incorporator(s) this _______ day of _______, 1998
Robert B. Pomerenk, Esq.
Luse Lehman Gorman Pomerenk & Schick
5335 Wisconsin Avenue, N.W., Suite 400
Washington, DC 20015
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SERVICE BANCORP, INC.
BYLAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting. An annual meeting of the stockholders, for
the election of Directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, on such date, and at such time as the Board of
Directors shall each year fix, which date shall be within thirteen (13) months
subsequent to the later of the date of incorporation or the last annual meeting
of stockholders.
Section 2. Special Meetings. Subject to the rights of the holders of
any class or series of preferred stock of the Corporation, special meetings of
stockholders of the Corporation may be called by the Board of Directors pursuant
to a resolution adopted by a majority of the total number of Directors which the
Corporation would have if there were no vacancies on the Board of Directors
(hereinafter, the "Whole Board").
Section 3. Notice of Meetings. Written notice of the place, date, and
time of all meetings of the stockholders shall be given, not less than ten (10)
nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or required by law (meaning, here and hereinafter, as required
from time to time by the Massachusetts General Laws or the Articles of
Organization of the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum. At any meeting of the stockholders, the holders of a
majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy (after giving effect to the Article FOURTH of the
Corporation's Articles of Organization), shall constitute a quorum for all
purposes, unless or except to the extent that the presence of a larger number
may be required by law. Where a separate vote by a class or classes is required,
a majority of the shares of such class or classes present in person or
represented by proxy shall constitute a quorum entitled to take action with
respect to that vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to another place,
date, or time.
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If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 5. Organization. Such person as the Board of Directors may have
designated or, in the absence of such a person, the Chairman of the Board of the
Corporation or, in his absence, the Chief Executive Officer or, in his absence,
such person as may be chosen by the holders of a majority of the shares entitled
to vote who are present, in person or by proxy, shall call to order any meeting
of the stockholders and act as chairman of the meeting. In the absence of the
Secretary of the Corporation, the secretary of the meeting shall be such person
as the chairman appoints.
Section 6. Conduct of Business.
(a) The chairman of any meeting of stockholders shall determine the
order of business and the procedure at the meeting, including such regulation of
the manner of voting and the conduct of discussion as seem to him in order. The
date and time of the opening and closing of the polls for each matter upon which
the stockholders will vote at the meeting shall be announced at the meeting.
(b) At any annual meeting of the stockholders, only such business shall
be conducted as shall have been brought before the meeting: (i) by or at the
direction of the Board of Directors; or (ii) by any stockholder of the
Corporation who is entitled to vote with respect thereto and who complies with
the notice procedures set forth in this Section 6(b). For business to be
properly brought before an annual meeting by a stockholder, the business must
relate to a proper subject matter for stockholder action and the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered or mailed to
and received at the principal executive offices of the Corporation not less than
ninety (90) days prior to the date of the annual meeting; provided, however,
that in the event that less than one hundred (100) days' notice or prior public
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be received not later than the close of
business on the 10th day following the day on which such notice of the date of
the annual meeting was mailed or such public disclosure was made. A
stockholder's notice to the Secretary shall set forth as to each matter such
stockholder proposes to bring before the annual meeting: (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting; (ii) the name and address,
as they appear on the Corporation's books, of the stockholder proposing such
business; (iii) the class and number of shares of the Corporation's capital
stock that are beneficially owned by such stockholder; and (iv) any material
interest of such stockholder in such business. Notwithstanding anything in these
Bylaws to the contrary, no business shall be brought before or conducted at an
annual meeting except in accordance with the provisions of this Section 6(b).
The Officer of the Corporation or other person presiding over the annual meeting
shall, if the facts so warrant, determine and declare to the meeting that
business was not properly brought before the meeting in accordance with the
provisions of this
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Section 6(b) and, if he should so determine, he shall so declare to the meeting
and any such business so determined to be not properly brought before the
meeting shall not be transacted.
At any special meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting by or at the direction
of the Board of Directors.
(c) Only persons who are nominated in accordance with the procedures
set forth in these Bylaws shall be eligible for election as Directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders at which Directors are to be elected
only: (i) by or at the direction of the Board of Directors; or (ii) by any
stockholder of the Corporation entitled to vote for the election of Directors at
the meeting who complies with the notice procedures set forth in this Section
6(c). Such nominations, other than those made by or at the direction of the
Board of Directors, shall be made by timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered or
mailed to and received at the principal executive offices of the Corporation not
less than ninety (90) days prior to the date of the meeting; provided, however,
that in the event that less than one hundred (100) days' notice or prior
disclosure of the date of the meeting is given or made to stockholders, notice
by the stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth: (i) as to each person whom such stockholder proposes to
nominate for election or re-election as a Director, all information relating to
such person that is required to be disclosed in solicitations of proxies for the
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934 (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a Director if elected); and (ii) as to the stockholder giving
notice of (x) the name and address, as they appear on the Corporation's books,
of such stockholder and (y) the class and number of shares of the Corporation's
capital stock that are beneficially owned by such stockholder. At the request of
the Board of Directors any person nominated by the Board of Directors for
election as a Director shall furnish to the Secretary of the Corporation that
information required to be set forth in a stockholder's notice of nomination
which pertains to the nominee. No person shall be eligible for election as a
Director of the Corporation unless nominated in accordance with the provisions
of this Section 6(c). The Officer of the Corporation or other person presiding
at the meeting shall, if the facts so warrant, determine that a nomination was
not made in accordance with such provisions and, if he should so determine, he
shall declare to the meeting and the defective nomination shall be disregarded.
Section 7. Proxies and Voting. At any meeting of the stockholders,
every stockholder entitled to vote may vote in person or by proxy authorized by
an instrument in writing or by a transmission permitted by law filed in
accordance with the procedure established for the meeting. Any copy, facsimile
telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this paragraph may be substituted or used in lieu of the
original writing or transmission for any and all purposes for which the original
writing or transmission could be used,
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provided that such copy, facsimile telecommunication or other reproduction shall
be a complete reproduction of the entire original writing or transmission.
All voting, including on the election of Directors but excepting where
otherwise required by law or by the governing documents of the Corporation, may
be by a voice vote; provided, however, that upon demand therefor by a
stockholder entitled to vote or by his proxy, a stock vote shall be taken. Every
stock vote shall be taken by ballots, each of which shall state the name of the
stockholder or proxy voting and such other information as may be required under
the procedure established for the meeting. The Corporation shall, in advance of
any meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The Corporation may designate one or
more persons as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting shall appoint one or more inspectors to act at
the meeting. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his ability.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by the Certificate of Incorporation or by law, all
other matters shall be determined by a majority of the votes present and cast at
a properly called meeting of stockholders.
Section 8. Stock List. A complete list of stockholders entitled to vote
at any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in his name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
Section 9. Consent of Stockholders in Lieu of Meeting. Subject to the
rights of the holders of any class or series of preferred stock of the
Corporation, any action required or permitted to be taken by the stockholders of
the Corporation must be effected at an annual or special meeting of stockholders
of the Corporation and may not be effected by any consent in writing by such
stockholders.
ARTICLE II - BOARD OF DIRECTORS
Section 1. General Powers, Number and Term of Office. The business and
affairs of the Corporation shall be under the direction of its Board of
Directors. The number of Directors who
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shall constitute the Whole Board shall be such number as the Board of Directors
shall from time to time have designated, except that in the absence of any such
designation, such number shall be sixteen (16). The Board of Directors may
annually elect a Chairman of the Board from among its members who shall, when
present, preside at its meetings. In the absence of a Chairman of the Board,
meetings of the Board of Directors will be chaired by a Director selected by the
Board of Directors from among its members.
The Directors, other than those who may be elected by the holders of
any class or series of Preferred Stock, shall be divided, with respect to the
time for which they severally hold office, into three classes, with the term of
office of the first class to expire at the first annual meeting of stockholders,
the term of office of the second class to expire at the annual meeting of
stockholders one year thereafter and the term of office of the third class to
expire at the annual meeting of stockholders two years thereafter, with each
Director to hold office until his successor shall have been duly elected and
qualified. At each annual meeting of stockholders, commencing with the first
annual meeting, Directors elected to succeed those Directors whose terms then
expire shall be elected for a term of office to expire at the third succeeding
annual meeting of stockholders after their election, with each Director to hold
office until his successor shall have been duly elected and qualified. No person
shall be elected or appointed to serve or shall continue to serve as a Director
if he or she has reached the age of seventy-two (72) years.
Section 2. Vacancies and Newly Created Directorships. Subject to the
rights of the holders of any class or series of preferred stock, and unless the
Board of Directors otherwise determines, newly created Directorships resulting
from any increase in the authorized number of Directors or any vacancies in the
Board of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause may be filled only by a
majority vote of the Directors then in office, though less than a quorum, and
Directors so chosen shall hold office for a term specified by the Directors then
in office or, if not so specified, for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which they have been
elected expires and until such Director's successor shall have been duly elected
and qualified. No decrease in the number of authorized Directors constituting
the Board shall shorten the term of any incumbent Director.
Section 3. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the Board of Directors and publicized
among all Directors. A notice of each regular meeting shall not be required.
Section 4. Special Meetings. Special meetings of the Board of Directors
may be called by one-third (1/3) of the Directors then in office (rounded up to
the nearest whole number) or by the Chief Executive Officer and shall be held at
such place, on such date, and at such time as they or he shall fix. Notice of
the place, date, and time of each such special meeting shall be given to each
Director by whom it is not waived by mailing written notice not less than five
(5) days before the meeting or be telegraphing or telexing or by facsimile
transmission of the same not less than
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twenty-four (24) hours before the meeting. Unless otherwise indicated in the
notice thereof, any and all business may be transacted at a special meeting.
Section 5. Quorum. At any meeting of the Board of Directors, a majority
of the Whole Board shall constitute a quorum for all purposes. If a quorum shall
fail to attend any meeting, a majority of those present may adjourn the meeting
to another place, date, or time, without further notice or waiver thereof.
Section 6. Participation in Meetings By Conference Telephone. Members
of the Board of Directors, or of any committee thereof, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and such participation shall constitute presence in
person at such meeting but shall not constitute attendance for the purpose of
compensation pursuant to Section 9 of this Article II, unless the Board of
Directors by resolution so provides.
Section 7. Conduct of Business. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as the Board
may from time to time determine, and all matters shall be determined by the vote
of a majority of the Directors present, except as otherwise provided herein or
required by law. Action may be taken by the Board of Directors without a meeting
if all members thereof consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the Board of Directors.
Section 8. Powers. The Board of Directors may, except as otherwise
required by law, exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with
law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form
as it may determine, of written obligations of every kind, negotiable
or non-negotiable, secured or unsecured, and to do all things
necessary in connection therewith;
(4) To remove any Officer of the Corporation with or without
cause, and from time to time to devolve the powers and duties of any
Officer upon any other person for the time being;
(5) To confer upon any Officer of the Corporation the power to
appoint, remove and suspend subordinate Officers, employees and
agents;
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(6) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for Directors, Officers,
employees and agents of the Corporation and its subsidiaries as it may
determine;
(7) To adopt from time to time such insurance, retirement, and
other benefit plans for Directors, Officers, employees and agents of
the Corporation and its subsidiaries as it may determine; and
(8) To adopt from time to time regulations, not inconsistent with
these Bylaws, for the management of the Corporation's business and
affairs.
Section 9. Compensation of Directors
Directors, as such, may receive, pursuant to resolution of the Board of
Directors, fixed fees and other compensation for their services as Directors,
including, without limitation, their services as members of committees of the
Board of Directors.
Section 10. Removal.
A director may be removed only for cause as provided in the
Corporation's Articles of Organization. Any Director may resign at any time
giving written notice to Chairman of the Board or the Secretary. Any Director
who is absent from three or more meetings of the Board of Directors in a twelve
month period, or four or more meetings in a 24 month period, shall no longer be
qualified to serve as a Director and shall be removed automatically from his or
her position as a Director.
ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors. The Board of
Directors, by a vote of a majority of the Whole Board, may from time to time
designate committees of the Board, with such lawfully delegable powers and
duties as it thereby confers, to serve at the pleasure of the Board and shall,
for those committees and any others provided for herein, elect a Director or
Directors to serve as the member or members, designating, if it desires, other
Directors as alternate members who may replace any absent or disqualified member
at any meeting of the committee. Any committee so designated may exercise the
power and authority of the Board of Directors to declare a dividend, to
authorize the issuance of stock or to adopt a certificate of ownership and
merger pursuant to applicable law if the resolution which designates the
committee or a supplemental resolution of the Board of Directors shall so
provide. In the absence or disqualification of any member of any committee and
any alternate member in his place, the member or members of the committee
present at the meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may by unanimous vote appoint another member of the
Board of Directors to act at the meeting in the place of the absent or
disqualified member.
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Section 2. Conduct of Business. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as otherwise provided herein or required by law.
Adequate provision shall be made for notice to members of all meetings;
one-third (1/3) of the members shall constitute a quorum unless the committee
shall consist of one (1) or two (2) members, in which event one (1) member shall
constitute a quorum; and all matters shall be determined by a majority vote of
the members present. Action may be taken by any committee without a meeting if
all members thereof consent thereto in writing, and the writing or writings are
filled with the minutes of the proceedings of such committee.
Section 3. Nominating Committee. The Board of Directors shall appoint a
Nominating Committee of the Board, consisting of not less than three (3)
members, one of which shall be the Chief Executive Officer (if a member of the
Board of Directors). The Nominating Committee shall have authority (a) to review
any nominations for election to the Board of Directors made by a stockholder of
the Corporation pursuant to Section 6(c)(ii) of Article I of these Bylaws in
order to determine compliance with such Bylaw provision and (b) to recommend to
the Whole Board nominees for election to the Board of Directors to replace those
Directors whose terms expire at the annual meeting of stockholders next ensuing.
ARTICLE IV - OFFICERS
Section 1. Generally.
(a) The Board of Directors as soon as may be practicable after the
annual meeting of stockholders may choose a Chairman of the Board, and shall
choose a President, a Chief Executive Officer, one or more Vice Presidents, and
a Secretary and from time to time may choose such other Officers as it may deem
proper. The Chairman of the Board, if any, shall be chosen from among the
Directors. Any number of offices may be held by the same person.
(b) The term of office of all Officers shall be until the next annual
election of Officers and until their respective successors are chosen, but any
Officer may be removed from office at any time by the affirmative vote of a
majority of the authorized number of Directors then constituting the Board of
Directors.
(c) All Officers chosen by the Board of Directors shall each have such
powers and duties as generally pertain to their respective offices, subject to
the specific provisions of this Article IV. Such Officers shall also have such
powers and duties as from time to time may be conferred by the Board of
Directors or by any committee thereof.
Section 2. Chairman of the Board. The Chairman of the Board, if one is
chosen, shall, subject to the provisions of these Bylaws and to the direction of
the Board of Directors, serve in a general executive capacity and, when present,
shall preside at all meetings of the Board of Directors or the stockholders of
the Corporation. The Chairman of the Board shall perform all duties and have all
powers which are commonly incident to the office of Chairman of the Board or
which are
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delegated to him by the Board of Directors. He shall have power to sign all
stock certificates, contracts and other instruments of the Corporation which are
authorized.
Section 3. Chief Executive Officer. The Chief Executive Officer shall
have general responsibility for the management and control of the business and
affairs of the Corporation and shall perform all duties and have all powers
which are commonly incident to the office of Chief Executive Officer or which
are delegated to him by the Board of Directors. Subject to the direction of the
Board of Directors, and in the absence of a Chairman of the Board, the Chief
Executive Officer shall have all of the powers and perform all of the duties of
the Chairman of the Board (as designated in Section 2), and shall also have
power to sign all stock certificates, contracts and other instruments of the
Corporation which are authorized and shall have general supervision of all of
the other Officers (other than the Chairman of the Board, if any), employees and
agents of the Corporation.
Section 4. President. The President shall have such powers and shall
perform such duties as are provided in these Bylaws or as may be assigned to him
by the Board of Directors or the Chief Executive Officer.
Section 5. Vice Presidents. The Vice President or Vice Presidents shall
perform the duties and exercise the powers usually incident to their respective
offices and/or such other duties and powers as may be properly assigned to them
by the Board of Directors or the Chief Executive Officer. A Vice President or
Vice Presidents may be designated as Executive Vice President or Senior Vice
President.
Section 6. Secretary. The Secretary or an Assistant Secretary shall
issue notices of meetings, shall keep their minutes, shall have charge of the
seal and the corporate books, shall perform such other duties and exercise such
other powers as are usually incident to such offices and/or such other duties
and powers as are properly assigned thereto by the Board of Directors or the
Chief Executive Officer.
Section 7. Assistant Secretaries and Other Officers. The Board of
Directors may appoint one or more Assistant Secretaries and such other Officers
who shall have such powers and shall perform such duties as are provided in
these Bylaws or as may be assigned to them by the Board of Directors or the
Chief Executive Officer.
Section 8. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the Chief Executive Officer
or any Officer of the Corporation authorized by the Chief Executive Officer
shall have power to vote and otherwise act on behalf of the Corporation, in
person or in which the Corporation may hold securities and otherwise to exercise
any and all rights and powers which the Corporation may possess by reason of its
ownership of securities in such other corporation.
9
<PAGE>
ARTICLE V - STOCK
Section 1. Certificates of Stock. Each stockholder shall be entitled to
a certificate signed by, or in the name of the Corporation by, the Chairman of
the Board or the Chief Executive Officer, and by the Secretary or an Assistant
Secretary, or any Treasurer or Assistant Treasurer, certifying the number of
shares owned by him. Any or all of the signatures on the certificate may be by
facsimile.
Section 2. Transfers of Stock. Transfers of stock shall be made only
upon the transfer books of the Corporation kept at an office of the Corporation
or by transfer agents designated to transfer shares of the stock of the
Corporation. Except where a certificate is issued in accordance with Section 4
of Article V of these Bylaws, an outstanding certificate for the number of
shares involved shall be surrendered for cancellation before a new certificate
is issued therefor.
Section 3. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders, or
to receive payment of any dividend or other distribution or allotment of any
rights or to exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the date on
which the resolution fixing the record date is adopted and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
any meeting of stockholders, nor more than sixty (60) days prior to the time for
such other action as hereinbefore described; provided, however, that if no
record date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held, and, for determining
stockholders entitled to receive payment of any dividend or other distribution
or allotment of rights or to exercise any rights of change, conversion or
exchange of stock or for any other purpose, the record date shall be at the
close of business on the day on which the Board of Directors adopts a resolution
relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates. In the event of the
loss, theft or destruction of any certificate of stock, another may be issued in
its place pursuant to such regulations as the Board of Directors may establish
concerning proof of such loss, theft or destruction and concerning the giving of
a satisfactory bond or bonds of indemnity.
Section 5. Regulations. The issue, transfer, conversion and
registration of certificates of stock shall be governed by such other
regulations as the Board of Directors may establish.
10
<PAGE>
ARTICLE VI - NOTICES
Section 1. Notices. Except as otherwise specifically provided herein or
required by law, all notices required to be given to any stockholder, Director,
Officer, employee or agent shall be in writing and may in every instance be
effectively given by hand delivery to the recipient thereof, by depositing such
notice in the mails, postage paid, or by sending such notice by prepaid telegram
or mailgram or other courier. Any such notice shall be addressed to such
stockholder, Director, Officer, employee or agent at his last known address as
the same appears on the books of the Corporation. The time when such notice is
received, if hand delivered, or dispatched, if delivered through the mails or by
telegram or mailgram or other courier, shall be the time of the giving of the
notice.
Section 2. Waivers. A written waiver of any notice, signed by a
stockholder, Director, Officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, Director, Officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver.
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures. In addition to the provisions for use
of facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of any Officer or Officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
Section 2. Corporate Seal. The Board of Directors may provide a
suitable seal, containing the name of the Corporation, which seal shall be in
the charge of the Secretary. If and when so directed by the Board of Directors
or a committee thereof, duplicates of the seal may be kept and used by the
Comptroller or by an Assistant Secretary or an assistant to the Comptroller.
Section 3. Reliance upon Books, Reports and Records. Each Director,
each member of any committee designated by the Board of Directors, and each
Officer of the Corporation shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or other records of
the Corporation and upon such information, opinions, reports or statements
presented to the Corporation by any of its Officers or employees, or committees
of the Board of Directors so designated, or by any other person as to matters
which such Director or committee member reasonably believes are within such
other person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 5. Time Periods. In applying any provision of these Bylaws
which requires that an act be done or not be done a specified number of days
prior to an event or that an act be done
11
<PAGE>
during a period of a specified number of days prior to an event, calendar days
shall be used, the day of the doing of the act shall be excluded, and the day of
the event shall be included.
ARTICLE VIII - AMENDMENT
The Board of Directors may amend, alter or repeal these Bylaws at any
meeting of the Board, provided notice of the proposed change is given not less
than two days prior to the meeting. The stockholders shall also have power to
amend, alter or repeal these Bylaws at any meeting of stockholders, provided
notice of the proposed change was given in the Notice of the Meeting; provided,
however, that, notwithstanding any other provisions of these Bylaws or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of the Voting Stock Designation or these Bylaws, the affirmative votes of
the holders of at least eighty percent (80%) of the voting power of all the
then-outstanding shares of the Voting Stock, voting together as a single class,
shall be required to alter, amend or repeal any provisions of these Bylaws.
12
EXHIBIT 23.2
<PAGE>
[WOLF & COMPANY, P.C. LETTERHEAD]
- --------------------------------------------------------------------------------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in this Amendment No. 1 to Registration Statement on Form
SB-2 and Prospectus of Service Bancorp, Inc. (proposed holding company for
Summit Bank) of our report dated August 8, 1997, except for Notes 15 and 16 as
to which the dates are August 19, 1997 and March 12, 1998, respectively, on the
consolidated balance sheets of Summit Bank as of June 30, 1997 and 1996, and the
related consolidated statements of income, changes in retained earnings and cash
flows for the years then ended and to the use of our name and the statements
with respect to us, as appearing under the heading "Experts" in the Prospectus.
/s/ Wolf & Company, P.C.
Wolf & Company, P.C.
Boston, Massachusetts
July 24, 1998
EXHIBIT 23.4
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
July 27, 1998
Board of Trustees
Service Bancorp, MHC
Board of Directors
Summit Bank
81 Main Street
Medway, Massachusetts 02053
Gentlemen:
We hereby consent to the use of our firm's name in the Form SB-2 Registration
Statement and any amendments thereto for Service Bancorp, Inc. We also hereby
consent to the inclusion of, summary of and references to our Appraisal and our
statement concerning subscription rights in such filings including the
Prospectus of Service Bancorp, Inc.
Sincerely,
RP FINANCIAL, LC.
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
- --------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center
1700 North Moore Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
Exhibit 99.3
PRO FORMA VALUATION REPORT
MUTUAL HOLDING COMPANY
STOCK OFFERING
SUMMIT BANK
Medway, Massachusetts
Dated As Of:
May 29, 1998
Prepared By:
RP Financial, LC.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
May 29, 1998
Board of Trustees
Service Bancorp, MHC
Board of Directors
Summit Bank
81 Main Street
Medway, Massachusetts 02053
Gentlemen:
At your request, we have completed and hereby provide an independent
appraisal ("Appraisal") of the estimated pro forma market value of the Common
Stock which is to be offered in connection with the mutual-to-stock conversion
transaction described below.
This appraisal is furnished pursuant to the requirements of 563b.7 and has
been prepared in accordance with the "Guidelines for Appraisal Reports for the
Valuation of Savings and Loan Associations Converting from Mutual to Stock Form
of Organization" ("Valuation Guidelines") of the Office of Thrift Supervision
("OTS"), including the most recent revisions as of October 21, 1994, and
applicable regulatory interpretations thereof. Such Valuation Guidelines are
relied upon by the Division of Banks of the Commonwealth of Massachusetts (the
"Division") and the Federal Deposit Insurance Corporation ("FDIC") in evaluating
conversion appraisals in the absence of separate written valuation guidelines by
the respective agencies.
Description of Reorganization and Stock Issuance Plan
We understand that the Board of Trustees of Service Bancorp, MHC, Medway,
Massachusetts (the "MHC") and the Board of Directors of Summit Bank, Medway,
Massachusetts ("Summit" or the "Bank") recently adopted a stock issuance plan.
Pursuant to the stock issuance plan, the Bank will reorganize into what is
called a "two-tier" mutual holding company structure. It is a two-tier structure
because it will have two levels of holding companies: a "mid-tier" stock holding
company and a "top-tier" mutual holding company. Under the terms of the stock
issuance plan: (i) the MHC will form Summit Bancorp, Inc. ("Summit Bancorp" or
the "Holding Company") as a Massachusetts corporation; (ii) the MHC will
contribute 100 percent of the Bank's outstanding stock to the Holding Company;
and (iii) the Holding Company will issue shares of common stock to the public
and the MHC. The number of shares of common stock sold to the public will equal
45 percent of the shares issued in the offering, and the number of shares issued
to the MHC will equal 55 percent of the shares issued in the offering.
It is anticipated that the public shares will be issued to the Bank's
Eligible Account Holders, Supplemental Eligible Account Holders, the ESOP, and
employees, officers, directors and trustees of the MHC and the Bank. Any shares
that are not sold in the Subscription offering may be offered in the Community
offering.
<PAGE>
RP Financial, LC.
Board of Directors
May 29, 1998
Page 2
The aggregate amount of stock sold by the Holding Company cannot exceed the
appraised value of the Bank. Immediately following the offering, the primary
assets of the Holding Company will be the capital stock of the Bank and the net
offering proceeds remaining after contributing proceeds to the Bank in exchange
for 100 percent of the capital stock of the Bank. The Holding Company will
contribute at least 50 percent of the net offering proceeds in exchange for the
Bank's capital stock. The remaining net offering proceeds, retained at the
Holding Company, will be used to fund a loan to the ESOP with the remainder to
be used as general working capital.
RP Financial, LC.
RP Financial, LC. ("RP Financial") is a financial consulting firm serving
the financial services industry nationwide that, among other things, specializes
in financial valuations and analyses of business enterprises and securities,
including the pro forma valuation for savings institutions converting from
mutual-to-stock form. The background and experience of RP Financial is detailed
in Exhibit V-1. We believe that, except for the fee we will receive for our
appraisal and assisting the Bank in the preparation of its business plan, we are
independent of the Bank and the other parties engaged by the Bank to assist in
the stock issuance process.
Valuation Methodology
In preparing our appraisal, we have reviewed the Bank's and the Holding
Company's regulatory applications, including the offering circular as filed with
the FDIC, the Division and the Securities and Exchange Commission ("SEC"). We
have conducted a financial analysis of the Bank that has included a review of
its audited financial information for fiscal years ended June 30, 1993 through
1997 and various unaudited information and internal financial reports through
March 31, 1998 and due diligence related discussions with the Bank's management;
Wolf & Company, P.C., the Bank's independent auditor; Luse Lehman Gorman
Pomerenk & Schick, the Bank's stock issuance counsel; and Trident Securities,
Inc., the Bank's financial and marketing advisors in connection with the Holding
Company's stock offering. All conclusions set forth in the Appraisal were
reached independently from such discussions. In addition, where appropriate, we
have considered information based on other available published sources that we
believe are reliable. While we believe the information and data gathered from
all these sources are reliable, we cannot guarantee the accuracy and
completeness of such information.
We have investigated the competitive environment within which the Bank
operates and have assessed the Bank's relative strengths and weaknesses. We have
kept abreast of the changing regulatory and legislative environment for
financial institutions and analyzed the potential impact on the Bank and the
industry as a whole. We have analyzed the potential effects of conversion on the
Bank's operating characteristics and financial performance as they relate to the
pro forma market value. We have reviewed the economy in the Bank's primary
market area and have compared the Bank's financial performance and condition
with publicly-traded thrifts in mutual holding company form, as well as all
publicly-traded thrifts. We have reviewed conditions in the securities markets
in general and in the market for thrift stocks in particular, including the
market for existing thrift issues and the market for initial public offerings by
thrifts. We have considered the market for the stock of all publicly-traded
mutual holding companies. We have also considered the expected market for the
Bank's public
<PAGE>
RP Financial, LC.
Board of Directors
May 29, 1998
Page 3
shares. We have excluded from such analyses thrifts subject to announced or
rumored acquisition, mutual holding company institutions that have announced
their intent to pursue second step conversions, and/or those institutions that
exhibit other unusual characteristics.
Our Appraisal is based on the Bank's representation that the information
contained in the regulatory applications and additional information furnished to
us by the Bank, its independent auditors, legal counsel and other authorized
agents are truthful, accurate and complete. We did not independently verify the
financial statements and other information provided by the Bank, its independent
auditors, legal counsel and other authorized agents nor did we independently
value the assets or liabilities of the Bank. The valuation considers the Bank
only as a going concern and should not be considered as an indication of the
Bank's liquidation value.
Our appraised value is predicated on a continuation of the current
operating environment for the Bank, the MHC and the Holding Company and for all
thrifts and their holding companies. Changes in the local, state and national
economy, the legislative and regulatory environment for financial institutions
and mutual holding companies, the stock market, interest rates, and other
external forces (such as natural disasters or significant world events) may
occur from time to time, often with great unpredictability, and may materially
impact the value of thrift stocks as a whole or the Bank's, the MHC's and
Holding Company's values alone. It is our understanding that there are no
current or long-term plans for pursuing a second step conversion or for selling
control of the Holding Company or the Bank following the offering. To the extent
that such factors can be foreseen, they have been factored into our analysis.
Pro forma market value is defined as the price at which Summit's stock,
immediately upon completion of the offering, would change hands between a
willing buyer and a willing seller, neither being under any compulsion to buy or
sell and both having reasonable knowledge of relevant facts.
Valuation Conclusion
It is our opinion that, as of May 29, 1998, the estimated aggregate pro
forma market value of the shares to be issued immediately following the
offering, both shares issued publicly as well as to the MHC, was $20,000,000 at
the midpoint, equal to 2,000,000 shares issued at a per share value of $10.00.
Pursuant to conversion guidelines, the 15 percent offering range indicates a
minimum value of $17,000,000, and a maximum value of $23,000,000. Based on the
$10.00 per share offering price determined by the Boards, this valuation range
equates to an offering of 1,700,000 shares at the minimum to 2,300,000 shares at
the maximum. In the event that the appraised value is subject to an increase, up
to 2,645,000 shares may be issued at an issue price of $10.00 per share, for an
aggregate market value of $26,450,000, without a resolicitation. The Board of
Trustees and Board of Directors have established a public offering range such
that the public ownership of the Holding Company will constitute a 45 percent
ownership interest of the Holding Company, with the MHC owning the majority of
the shares. Accordingly, the offering range to the public of the minority stock
will be $7,650,000 at the minimum, $9,000,000 at the midpoint, $10,350,000 at
the maximum and $11,902,500 at the supermaximum.
<PAGE>
RP Financial, LC.
Board of Directors
May 29, 1998
Page 4
Limiting Factors and Considerations
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
Common Stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the offering will thereafter be able to buy or sell
such shares at prices related to the foregoing valuation of the pro forma market
value thereof.
RP Financial's valuation was determined based on the financial condition
and operations of the Bank as of March 31, 1998, the date of the financial data
included in the regulatory applications and prospectus.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
The valuation will be updated as provided for in the conversion regulations
and guidelines. These updates will consider, among other things, any
developments or changes in the Bank's financial performance and condition,
management policies, and current conditions in the equity markets for thrift
shares. These updates may also consider changes in other external factors which
impact value including, but not limited to: various changes in the legislative
and regulatory environment, the stock market and the market for thrift stocks,
and interest rates. Should any such new developments or changes be material, in
our opinion, to the valuation of the shares, appropriate adjustments to the
estimated pro forma market value will be made. The reasons for any such
adjustments will be explained in the update at the date of the release of the
update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ William E. Pommerening
--------------------------------
William E. Pommerening
Chief Executive Officer
/s/ Gregory E. Dunn
--------------------------------
Gregory E. Dunn
Senior Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
SUMMIT BANCORP, INC.
SUMMIT BANK
Medway, Massachusetts
PAGE
DESCRIPTION NUMBER
----------- ------
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
-----------
Introduction 1.1
Stock Issuance Plan 1.1
Strategic Overview 1.2
Balance Sheet Trends 1.4
Income and Expense Trends 1.8
Interest Rate Risk Management 1.12
Lending Activities and Strategy 1.13
Asset Quality 1.16
Funding Composition and Strategy 1.16
Subsidiaries 1.17
Legal Proceedings 1.18
CHAPTER TWO MARKET AREA
-----------
Introduction 2.1
Market Area Demographics 2.1
National Economic Factors 2.3
Local Economy 2.8
Market Area Deposit Characteristics and Competition 2.9
CHAPTER THREE PEER GROUP ANALYSIS
-------------
Peer Group Selection 3.1
Basis of Comparison 3.2
Selection of Peer Group 3.3
Financial Condition 3.6
Income and Expense Components 3.9
Loan Composition 3.12
Interest Rate Risk 3.15
Credit Risk 3.15
Summary 3.18
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
SUMMIT BANCORP, INC.
SUMMIT BANK
Medway, Massachusetts
(continued)
PAGE
DESCRIPTION NUMBER
----------- ------
CHAPTER FOUR VALUATION ANALYSIS
------------
Introduction 4.1
Appraisal Guidelines 4.1
RP Financial Approach to the Valuation 4.1
Valuation Analysis 4.2
1. Financial Condition 4.3
2. Profitability, Growth and Viability of Earnings 4.4
3. Asset Growth 4.6
4. Primary Market Area 4.6
5. Dividends 4.7
6. Liquidity of the Shares 4.9
7. Marketing of the Issue 4.10
A. The Public Market 4.10
B. The New Issue Market 4.17
C. The Acquisition Market 4.19
8. Management 4.21
9. Effect of Government Regulation and Regulatory
Reform 4.22
Summary of Adjustments 4.22
Basis of Valuation - Fully-Converted Pricing Ratios 4.22
Valuation Approaches 4.23
1. Price-to-Earnings ("P/E") 4.26
2. Price-to-Book ("P/B") 4.27
3. Price-to-Assets ("P/A") 4.29
Valuation Conclusion 4.29
<PAGE>
RP Financial, LC.
LIST OF TABLES
SUMMIT BANCORP, INC.
SUMMIT BANK
Medway, Massachusetts
TABLE
NUMBER DESCRIPTION PAGE
------ ----------- ----
1.1 Historical Balance Sheets 1.5
1.2 Historical Income Statements 1.9
2.1 Summary Demographic Data 2.2
2.2 Unemployment Trends 2.9
2.3 Deposit Summary 2.11
3.1 Peer Group of Publicly-Traded Thrifts 3.5
3.2 Balance Sheet Composition and Growth Rates 3.7
3.3 Income as a Percent of Average Assets and
Yields, Costs, Spreads 3.10
3.4 Loan Portfolio Composition and Related
Information 3.13
3.5 Interest Rate Risk Measured and Net Interest
Income Volatility 3.16
3.6 Credit Risk Measured and Related Information 3.17
4.1 Peer Group Market Area Comparative Analysis 4.8
4.2 Recent Conversions Completed 4.18
4.3 Market Pricing Comparatives 4.20
4.4 Calculation of Implied Per Share Data --
Incorporating MHC Second Step Conversion 4.24
4.5 MHC Institutions -- Implied Pricing Ratios,
Full Conversion Basis 4.28
4.6 Pricing Table: MHC Comparables 4.31
<PAGE>
RP Financial, LC.
Page 1.1
I. Overview and Financial Analysis
Introduction
Summit Bank ("Summit" or the "Bank"), chartered in 1871, is a
Massachusetts-chartered stock savings bank subsidiary of Service Bancorp, MHC, a
Massachusetts-chartered mutual holding company (the "MHC"). Headquartered in
Medway, Massachusetts, the Bank conducts banking operations out of five full
service branch offices in the suburbs of Boston. The Bank's branches are located
in the towns of Medway, Franklin (2 branches), Medfield, and Millis, which are
all part of Norfolk County. Norfolk County is southwest of Boston. A map of the
Bank's office locations is presented in Exhibit I-1. The Bank's primary
regulator is the Division of Banks of the Commonwealth of Massachusetts (the
"Division"). Summit is a member of the Federal Home Loan Bank ("FHLB") system
and its deposits are insured up to the maximum allowable amount by the Bank
Insurance Fund ("BIF") of the Federal Deposit Insurance Corporation ("FDIC"). As
of March 31, 1998, Summit had $131.2 million in assets, $108.1 million in
deposits and total equity of $9.9 million, or 7.54 percent, of total assets.
Summit's audited financial statements are included by reference as Exhibit I-2.
Stock Issuance Plan
The Board of Trustees of the MHC and the Board of Directors of the Bank
recently adopted a stock issuance plan. Pursuant to the stock issuance plan, the
Bank will reorganize into what is called a "two-tier" mutual holding company
structure. It is a two-tier structure because it will have two levels of holding
companies: a "mid-tier" stock holding company and a "top-tier" mutual holding
company. Under the terms of the stock issuance plan: (i) the MHC will form
Summit Bancorp, Inc. ("Summit Bancorp" or the "Holding Company") as a
Massachusetts corporation; (ii) the MHC will contribute 100 percent of the
Bank's outstanding stock to the Holding Company; and (iii) the Holding Company
will issue shares of common stock to the public and the MHC. The number of
shares of common stock sold to the public will equal 45 percent of the shares
issued in the offering, and the number of shares issued to the MHC will equal 55
percent of the shares issued in the offering.
<PAGE>
RP Financial, LC.
Page 1.2
Strategic Overview
Summit is a community-oriented thrift, with a primary strategic objective
of meeting the borrowing and savings needs of its local customer base. In recent
years, Summit's operating strategy has been fairly reflective of a traditional
thrift operating strategy in which 1-4 family residential mortgage loans and
retail deposits have constituted the principal components of the Bank's assets
and liabilities, respectively. While the origination of 1-4 family residential
mortgage loans remains an area of lending emphasis for the Bank, diversification
into higher yielding and higher risk types of loans has become a more
significant part of the Summit's lending strategy in recent years. Lending
diversification by the Bank has been most notable in the area of commercial real
estate lending, while commercial business lending has also become an area of
loan growth for Summit as well. The Bank's loan portfolio composition also
includes diversification into consumer and construction loans, which consist
primarily of home equity loans and loans to construct 1-4 family residences,
respectively.
Summit's lending diversification has served to enhance the overall yield
earned on the loan portfolio, without impairment of credit quality. The Bank has
sought to limit the credit risk exposure associated with higher risk types of
loans, through emphasizing originating loans in local and familiar markets.
Credit risk associated with the loan portfolio has also been limited by the
strength of the local real estate market. After experiencing a sharp downturn in
real estate market conditions in the late-1980s and early-1990s, real estate
market conditions in the Boston metropolitan area have strengthened considerably
in recent years. The suburban markets to Boston, such as where the Bank
operates, have experienced increased demand for residential and commercial
properties, which has been facilitated by the expanding Boston economy.
Investments serve as a supplement to the Bank's lending activities, with
Summit's investment portfolio being indicative of a low risk investment
philosophy. Investment securities held by the Bank primarily consist of U.S.
Government and agency securities, corporate bonds, mortgage-backed securities,
and common stock equities. The Bank seeks to limit the credit risk associated
with the investment portfolio by purchasing corporate bonds with an "A" rating
or better and by maintaining a diversified portfolio. Mortgage-backed securities
held by the Bank are insured or guaranteed by federal agencies, while the
portfolio of common stock equities is comprised largely of "blue chip" stocks.
Interest rate risk is managed through emphasizing investing in short- and
intermediate-term securities with
<PAGE>
RP Financial, LC.
Page 1.3
maturities of less than 10 years. In recent years, gains realized from the sale
of investments securities have been a notable contributor to the Bank's
earnings, with such gains being generated from the portfolio of common stock
equities. Accordingly, the gains recorded by the Bank are viewed as being highly
dependent upon market conditions and are not budgeted as a recurring source of
income.
Retail deposits have consistently served as the primary interest-bearing
funding source for the Bank. The Bank has experienced strong deposit growth in
recent years, with such growth being realized from effective marketing of
certain savings programs, growth occurring in the market area and customer
fallout from other banks that have been acquired in Summit's market area. The
Bank's deposit composition reflects a higher concentration of transaction and
savings accounts, as opposed to CDs, although CD growth has accounted for most
of Summit's recent deposit growth. As of March 31, 1998, transaction and savings
accounts comprised approximately 54 percent of the Bank's total deposits.
Borrowings serve as an alternative funding source for the Bank to support
control of funding costs and to manage interest rate risk. The Bank held $12.4
million of borrowings at March 31, 1998, with the entire balance consisting of
FHLB advances.
Summit's earnings base is largely dependent upon net interest income and
operating expense levels. Overall, Summit's operating strategy has provided for
a relatively strong net interest margin in recent years, which has been
supported by diversification into higher yielding types of lending and a deposit
composition which is concentrated in lower costing transaction and savings
accounts. The Bank's operating expenses are also viewed as being relatively
high, which can in part be attributed to the relatively high number of branches
maintained for its asset size. Additionally, the Bank offers a relatively large
diversity of products and services for an institution of its asset size.
In recent years, Summit's operating strategy has resulted in strong asset
growth, an increasing capital position and healthy returns. Credit risk has been
limited by emphasizing lower risk 1-4 family loan originations, lending in local
and familiar market, favorable real estate market conditions and maintaining a
notable portion of interest-earning assets in low-risk types of investments.
Likewise, the Bank's strategies have been fairly effective in limiting interest
rate exposure, reflecting Summit's lending emphasis on originating short-term
and adjustable rate loans for portfolio and investing in short- and
intermediate-term securities. Maintenance of a relatively high concentration of
lower costing transaction and savings accounts has also served to limit the
Bank's exposure to interest rate fluctuations.
<PAGE>
RP Financial, LC.
Page 1.4
The Bank's business plan is to continue to operate as a community-oriented
bank, serving local customer needs with an array of loan and depository
products, and other financial services. The Bank has sought to assemble a
well-qualified management team and staff to facilitate the ability to fully
realize the business plan objectives.
A key component of the Bank's plan is to increase capital through the
minority stock offering. The capital realized from the minority stock offering
will support the continued expansion of the Bank's strategic focus of providing
competitive community banking services in its local market area. Summit's higher
equity-to-assets ratio will also better position the Bank to take advantage of
expansion opportunities as they arise. Such expansion would most likely occur
through establishing additional branches in markets currently served by the
Bank's branch network or nearby surrounding markets. At this time, the Bank has
no specific plans for physical expansion of office facilities other than the
relocation of its branch office in Medfield. The projected use of stock proceeds
are highlighted below.
o Holding Company. Summit Bancorp is expected to retain up to 50 percent
of the net offering proceeds. Such funds will initially be used to
provide a loan to the Bank's ESOP trust, and the balance will be
invested into short-term investments. Over time, the Holding Company
funds may be utilized for various corporate purposes, including
payment of dividends and possible repurchase of common stock.
o Summit. Approximately 50 percent of the net conversion proceeds will
be infused into the Bank in exchange for all of the Bank's newly
issued stock. The increase in capital will be less, as the amount to
be borrowed by the ESOP to fund an 8 percent stock purchase will be
deducted from capital. Cash proceeds (i.e., net proceeds less deposits
withdrawn to fund stock purchases) infused into the Bank are
anticipated to become part of general operating funds, and are
expected to initially be invested in short-term investments, pending
reinvestment into whole loans and the Bank's regular investment
activities.
Balance Sheet Trends
From June 30, 1993 through March 31, 1998, Summit exhibited annual asset
growth of positive 15.8 percent (see Table 1.1). During this period, the Bank's
interest-earning asset composition exhibited a shift towards a higher
concentration of investments as loan growth was somewhat contained by the sale
of most 1-4 family fixed rate loan originations to the secondary market.
Notwithstanding the decline in the Bank's level of loans comprising
interest-earning assets, loans continue to represent the most notable portion of
Summit's
<PAGE>
RP Financial, LC
Page 1.5
Table 1.1
Summit Bank
Historical Balance Sheets
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
At Fiscal Year End June 30,
------------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
---------------- ------------------- ---------------- ----------------- ------------------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
Total Amount of:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets ................... $65,363 100.0% $69,879 100.0% $77,111 100.0% $90,354 100.0% $104,878 100.0%
Cash and cash equivalents 4,598 7.0% 4,083 5.8% 6,677 8.7% 7,092 7.8% 9,129 8.7%
Certificates of deposit .. 0 0.0% 0 0.0% 0 0.0% 0 0.0% 500 0.5%
Investment securities .... 9,708 14.9% 15,389 22.0% 18,472 24.0% 18,727 20.7% 21,951 20.9%
Mortgage-backed securities 2,316 3.5% 1,632 2.3% 1,428 1.9% 2,076 2.3% 2,745 2.6%
FHLB stock ............... 475 0.7% 432 0.6% 432 0.6% 454 0.5% 538 0.5%
Loans receivable, net .... 46,426 71.0% 46,567 66.6% 47,784 62.0% 59,667 66.0% 66,934 63.8%
Deposits ................. 59,729 91.4% 62,863 90.0% 69,561 90.2% 81,189 89.9% 92,897 88.6%
Borrowings ............... 0 0.0% 335 0.5% 270 0.4% 369 0.4% 2,622 2.5%
Total equity ............. 5,018 7.7% 5,738 8.2% 6,601 8.6% 7,421 8.2% 8,695 8.3%
Full service branches .... 4 4 4 4 4
</TABLE>
Annual
At Growth
March 31, 1998 Rate
-------------------- ------
Amount Pct Pct
------ --- ---
($000) (%) (%)
Total Amount of:
Assets ................... $131,204 100.0% 15.80%
Cash and cash equivalents 11,126 8.5% 20.45%
Certificates of deposit .. 1,500 1.1% NM
Investment securities .... 35,380 27.0% 31.29%
Mortgage-backed securities 7,305 5.6% 27.36%
FHLB stock ............... 723 0.6% 9.25%
Loans receivable, net .... 72,197 55.0% 9.74%
Deposits ................. 108,056 82.4% 13.29%
Borrowings ............... 12,404 9.5% NM
Total equity ............. 9,890 7.5% 15.35%
Full service branches .... 5
- ----------
(1) Ratios are as a percent of ending assets.
Source: Summit's prospectus and audited financial statements.
<PAGE>
RP Financial, LC.
Page 1.6
interest-earning asset composition. Asset growth has been primarily funded by
deposits, and, to a lesser degree, borrowings and retained earnings. A summary
of Summit's key operating ratios for the past three and three-quarter fiscal
years are presented in Exhibit I-3.
Summit's net loans receivable balance increased from $46.4 million at June
30, 1993 to $72.2 million at March 31, 1998, providing for an annual growth rate
of 9.7 percent during that period. Positive loan growth was sustained through
the period; however, the most notable loan growth occurred during the past two
and three-quarter fiscal years. Recent growth of the loan portfolio has been
primarily supported by an increase in Summit's balance of commercial real estate
and multi-family loans, while positive growth has also been realized in 1-4
family permanent mortgage, consumer and commercial business loans. As the result
of recent growth trends, the most notable changes in the Bank's loan portfolio
composition have been an increasing level of commercial real estate and
multi-family loans and a declining level of 1-4 family permanent mortgage loans.
As of March 31, 1998, 1-4 family permanent mortgage loans and commercial real
estate/multi-family loans accounted for 62.8 percent and 16.7 percent of total
loans outstanding at March 31, 1998, respectively, versus comparative measures
of 71.0 percent and 9.7 percent at June 30, 1996. The balance of the loan
portfolio consists primarily of consumer loans, which increased from 9.6 percent
of loans outstanding at June 30, 1996 to 10.4 percent of loans outstanding at
March 31, 1998. Construction and commercial business loans comprised the
remaining portion of the Bank's loan portfolio composition, equaling 5.3 percent
and 4.8 percent of total loans outstanding, respectively, at March 31, 1998.
Since fiscal year end 1996, commercial business loans and construction loans
have exhibited very slight increases as a percent of total loans outstanding.
The intent of the Bank's investment policy is to provide adequate liquidity
and to generate a favorable return within the context of supporting Summit's
overall credit and interest rate risk objectives. Summit anticipates investing
the net proceeds from the stock offering into investments with short-term
maturities, pending deployment into loans and investments that are consistent
with the Bank's current investment strategies. Over the past five and
three-quarter fiscal years, the Bank's balance of cash, investment securities
and FHLB stock has fluctuated from a low of 22.6 percent of assets at fiscal
year end 1993 to a high of 37.2 percent of assets at March 31, 1998. The
relatively high level of cash and investments currently maintained by the Bank
resulted from strong deposit growth being primarily being deployed into cash and
investments, as well as recent leveraging of the balance sheet through utilizing
borrowings to fund purchases of investment and mortgage-backed securities. As of
March 31, 1998, the investment portfolio was comprised primarily of U.S.
Government and
<PAGE>
RP Financial, LC.
Page 1.7
agency securities ($29.6 million), with other investments held by the Bank
consisting of corporate bonds ($2.5 million), common stock equities ($3.3
million), and FHLB stock ($723,000). The Bank also maintained cash and cash
equivalents of $11.1 million and certificates of deposit of $1.5 million at
March 31, 1998. The Bank seeks to limit the credit risk associated with the
investment portfolio by purchasing corporate bonds with an "A" rating or better
and by maintaining a diversified portfolio. Interest rate risk is limited by
emphasizing investing in short- and intermediate-term securities with maturities
of less than 10 years. The equity securities portfolio consists of blue chip and
relatively low risk stocks. As of March 31, 1998, the entire investment
securities portfolio was classified as available for sale and totaled $35.4
million. The Bank maintained an unrealized gain of approximately $672,000 on the
investment portfolio, as of March 31, 1998. Exhibit I-4 provides further detail
of recent trends in the Bank's investment portfolio composition.
Mortgage-backed securities comprise the balance of the Bank's
interest-earning asset composition and are generally purchased as a means to
deploy excess liquidity at more favorable yields than other investment
alternatives that are consistent with Summit's investment philosophy. Over the
past five and three-quarter fiscal years, the Bank's mortgage-backed securities
portfolio has ranged from a low of 1.9 percent of assets at fiscal year end 1995
to a high of 5.6 percent of assets at March 31, 1998. Mortgage-backed securities
held by the Bank consists of securities guaranteed or insured by federal
agencies. The mortgage-backed securities portfolio is classified as available
for sale and consists primarily of adjustable rate securities. The Bank
maintained an unrealized gain of approximately $5,000 on the mortgage-backed
securities portfolio as of March 31, 1998.
Over the past five and three-quarter fiscal years, Summit's funding needs
have been substantially met through retail deposits, internal cash flows,
borrowings and retained earnings. From fiscal year end 1993 through March 31,
1998, the Bank's deposits increased at an annual rate of 13.3 percent. Positive
deposit growth was sustained throughout the period covered in Table 1.1, with
the most notable growth taking place during the past two and three quarter
fiscal years. In recent years, CDs have accounted for most of the Bank's deposit
growth, resulting in the concentration of CDs increasing from 43.3 percent of
total deposits at fiscal year end 1996 to 46.1 percent of total deposits at
March 31, 1998. While savings and transaction accounts have declined as percent
of total deposits, the Bank has recorded strong growth in those accounts as well
over the past two and three-quarter fiscal years. Most of the transaction and
savings account growth has been realized in checking accounts, which has been
supported by growth in the market area and obtaining retail and commercial
customers who
<PAGE>
RP Financial, LC.
Page 1.8
have become dissatisfied with their banking relationship following an
acquisition. As the result of the checking account growth, NOW and non-interest
bearing demand accounts currently comprise the largest component of the Bank's
transaction and savings account balance, totaling $27.3 million, or 46.8
percent, of total transaction and savings accounts at March 31, 1998.
Comparatively, at fiscal year end 1995, the Bank's NOW and non-interest bearing
demand accounts totaled $13.4 million, or 32.6 percent, of total transaction and
savings accounts.
The Bank's use of borrowings has become more notable during the past one
and three-quarter fiscal years, primarily as a means to facilitate leveraging of
the balance sheet and to manage interest rate risk. Borrowings for the Bank
totaled $12.4 million, or 9.5 percent, of assets at March 31, 1998, with the
entire balance consisting of FHLB advances. Comparatively, from fiscal year end
1993 through fiscal year end 1996, Summit's balance of borrowings was maintained
at less than 1.0 percent of assets. Most of the borrowings have fixed rate terms
of more than five years, but are callable in less than one year.
Positive earnings over the past four and three-quarter fiscal years
translated into an annual capital growth rate of 15.4 percent. Capital growth
was slightly less than the Bank's asset growth rate, as Summit's
equity-to-assets ratio declined from 7.7 percent at the end of fiscal year 1993
to 7.5 percent at March 31, 1998. As of March 31, 1998, the Bank's capital
consisted entirely of tangible capital. The Bank was classified as well
capitalized with respect to each of the regulatory capital requirements, as of
March 31, 1998. The addition of the offering proceeds will serve to further
strengthen Summit's capital position and competitive posture within its primary
market, as well as support expansion into other nearby markets if favorable
growth opportunities are presented.
Income and Expense Trends
The Bank has reported positive earnings over the past five and
three-quarter fiscal years, ranging from a low of 0.89 percent of average assets
during fiscal year 1993 to a high of 1.24 percent of average assets during
fiscal year 1994. The peak earnings recorded by the Bank was in part supported
by a a change in accounting principle, which resulted in a positive after-tax
adjustment to Summit's fiscal 1994 earnings. For the twelve months ended March
31, 1998, the Bank reported net income of $1.2 million or 1.06 percent of
average assets (see Table 1.2). Net interest income and operating expenses
represent the major components of the Bank's core earnings, which is
supplemented by non-interest operating income derived from
<PAGE>
RP Financial, LC
Page 1.9
Table 1.2
Summit Bank
Historical Income Statements
(Amount and Percent of Avg. Assets)(1)
<TABLE>
<CAPTION>
For the Fiscal Year Ended June 30,
--------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997
---------------- --------------- --------------- --------------- ---------------
Amount Pct Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income .................... $ 4,871 7.63% $ 4,503 6.66% $ 5,230 7.31% $ 6,102 7.39% $ 7,037 7.35%
Interest Expense .................. (1,863) -2.92% (1,624) -2.40% (2,018) -2.82% (2,746) -3.33% (3,174) -3.31%
------- ----- ------- ---- ------- ---- ------- ---- ------- ----
Net Interest Income ............... $ 3,008 4.71% $ 2,879 4.26% $ 3,212 4.49% $ 3,356 4.06% $ 3,863 4.03%
Provision for Loan Losses ......... (223) -0.35% (47) -0.07% (4) -0.01% (93) -0.11% (35) -0.04%
------- ----- ------- ---- ------- ---- ------- ---- ------- ----
Net Interest Income
after Provisions ................ $ 2,785 4.37% $ 2,832 4.19% $ 3,208 4.49% $ 3,263 3.95% $ 3,828 4.00%
Other Income ...................... 429 0.67% 417 0.62% 446 0.62% 466 0.56% 466 0.49%
Operating Expense ................. (2,343) -3.67% (2,497) -3.69% (2,573) -3.60% (2,735) -3.31% (3,252) -3.40%
------- ----- ------- ---- ------- ---- ------- ---- ------- ----
Net Operating Income ............. $ 871 1.37% $ 752 1.11% $ 1,081 1.51% $ 994 1.20% $ 1,042 1.09%
Non-Operating Income
Net gain(loss) on sale of loans/sec $ 139 0.22% $ 285 0.42% $ 149 0.21% $ 308 0.37% $ 493 0.51%
OREO and repossessed prop. exp ..... 0 0.00% 0 0.00% 0 0.00% 0 0.00% 158 0.17%
Other non-operating income(loss) ... 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
------- ----- ------- ---- ------- ---- ------- ---- ------- ----
Net Non-Operating Income ........ 139 0.22% 285 0.42% 149 0.21% 308 0.37% 651 0.68%
Net Income Before Tax ............. $ 1,010 1.58% $ 1,037 1.53% $ 1,230 1.72% $ 1,302 1.58% $ 1,693 1.77%
Income Taxes ...................... (444) -0.70% (406) -0.60% (472) -0.66% (501) -0.61% (611) -0.64%
Change in Acctg. Principle ......... -- 0.00% 210 0.31% -- 0.00% 0 0.00% -- --
------- ----- ------- ---- ------- ---- ------- ---- ------- ----
Net Income (Loss) ................. $ 566 0.89% $ 841 1.24% $ 758 1.06% $ 801 0.97% $ 1,082 1.13%
Adjusted Earnings
Net Income Before Ext. Items ....... $ 566 0.89% $ 631 0.93% $ 758 1.06% $ 801 0.97% $ 1,082 1.13%
Addback: Non-Operating Losses ...... 0 0.00% 0 0.00% 0 0.00% 0 0.00% 0 0.00%
Deduct: Non-Operating Gains ........ (139) -0.22% (285) -0.42% (149) -0.21% (308) -0.37% (651) -0.68%
Tax Effect Non-Op. Items(2) ........ 56 0.09% 114 0.17% 60 0.08% 123 0.15% 260 0.27%
------- ----- ------- ---- ------- ---- ------- ---- ------- ----
Adjusted Net Income ................ $ 483 0.76% $ 460 0.68% $ 669 0.93% $ 616 0.75% $ 691 0.72%
</TABLE>
For the 12 Months
Ended 3/31/98
-------------------
Amount Pct
------ ---
($000) (%)
Interest Income .................... $ 8,199 7.09%
Interest Expense .................. (3,822) -3.30%
------- ----
Net Interest Income ............... $ 4,377 3.78%
Provision for Loan Losses ......... (75) -0.06%
------- ----
Net Interest Income
after Provisions ................ $ 4,302 3.72%
Other Income ...................... 481 0.42%
Operating Expense ................. (3,749) -3.24%
------- ----
Net Operating Income ............. $ 1,034 0.89%
Non-Operating Income
Net gain(loss) on sale of loans/sec $ 843 0.73%
OREO and repossessed prop. exp ..... 6 0.01%
Other non-operating income(loss) ... 0 0.00%
------- ----
Net Non-Operating Income ........ 849 0.73%
Net Income Before Tax ............. $ 1,883 1.63%
Income Taxes ...................... (655) -0.57%
Change in Acctg. Principle ......... -- --
------- ----
Net Income (Loss) ................. $ 1,228 1.06%
Adjusted Earnings
Net Income Before Ext. Items ....... $ 1,228 1.06%
Addback: Non-Operating Losses ...... 0 0.00%
Deduct: Non-Operating Gains ........ (849) -0.73%
Tax Effect Non-Op. Items(2) ........ 340 0.29%
------- ----
Adjusted Net Income ................ $ 720 0.62%
- --------
(1) Ratios are as a percent of average assets.
(2) Assumes tax rate of 40.0 percent.
Sources: Summit's prospectus and audited financial statements.
<PAGE>
RP Financial, LC.
Page 1.10
Summit's retail banking activities. Gains realized primarily from the sale
equity securities have served to enhance the Bank's earnings over the past five
and three-quarter fiscal years, particularly during the most recent twelve month
period. Loan loss provisions have generally not been a significant factor in the
Bank's earnings.
Summit maintained a healthy net interest margin throughout the period shown
in Table 1.2, which can largely be attributed to low funding costs resulting
from the Bank's maintenance of a relatively high concentration of transaction
and savings accounts. However, over the past five and three-quarter fiscal
years, the Bank's net interest income to average assets ratio has declined
steadily to equal 3.78 percent for the twelve months ended March 31, 1998,
versus a comparative ratio of 4.71 percent during fiscal 1993. The decline in
the Bank's net interest margin has been attributable to both a declining
interest income to average assets ratio, which declined from 7.63 percent during
fiscal 1993 to 7.09 percent during the twelve months ended March 31, 1998, and
an increasing interest expense ratio, which increased from 2.92 percent during
fiscal 1993 to 3.30 percent during the twelve months ended March 31, 1998. The
negative trend in the interest income ratio can primarily be explained the shift
in the Bank's interest-earning asset composition towards a higher concentration
of investments, which tend to have lower yields than loans. Higher funding
costs, resulting from a shift in the Bank's deposit composition towards a higher
concentration of certificate of deposits and greater utilization of borrowings,
were among the noteworthy factors that contributed to the increase in Summit's
interest expense ratio. Detail of the Bank's net interest rate spreads and
yields and costs for the past two and three-quarter fiscal years is set forth in
Exhibit I-5.
Non-interest operating income has been a fairly stable factor in the Bank's
earnings over the past five and three-quarter fiscal years, although declining
as a percent of average assets. Throughout the period shown in Table 1.2,
non-interest operating income ranged from a high of 0.67 percent of average
assets in fiscal 1993 to a low of 0.42 percent of average assets for the twelve
months ended March 31, 1998. The lower ratio of non-interest operating income
recorded for the most recent twelve month period can be attributed to that
investments funded by borrowings accounted for a notable portion of the Bank's
growth during the period, and such wholesale growth does not generate
non-interest operating income. Service fees generated from retail customers
account for a major portion of the Bank's non-interest operating income. At this
time, the Bank has no plans to further diversify into activities that would
generate additional non-interest operating income and, thus, Summit's earnings
can be expected to remain highly dependent upon the net interest margin.
<PAGE>
RP Financial, LC.
Page 1.11
Operating expenses represent the other major component of the Bank's
earnings and have generally trended lower as a percent of average assets over
the past five and three-quarter fiscal years. The Bank's operating expense to
average assets ratio equaled 3.24 percent for the twelve months ended March 31,
1998, versus a comparative ratio of 3.67 percent for fiscal year 1993. Asset
growth has served to leverage the Bank's operating expense ratio, as Summit's
operating expenses have increased steadily over the past five and three-quarter
fiscal years. Notwithstanding the decline exhibited in the Bank's operating
expense ratio, Summit's operating expense ratio is still considered to be
relatively for a thrift institution. In comparison to all publicly-traded
thrifts, the Bank maintained a relatively high number of employees for its asset
size. Assets per full time equivalent employee equaled $2.6 million for the
Bank, versus a comparative average of $4.3 million for all publicly-traded
thrifts. Factors contributing to the Bank's above average level of operating
expenses include maintaining a relatively large branch network and offering a
relatively large diversity of products and services for an institution with
assets totaling $131 million. Upward pressure will be placed on the Bank's
operating expense ratio following the stock offering, due to expenses associated
with operating as a publicly-traded company, including expenses related to the
stock benefit plans. At the same time, the increase in capital realized from the
stock offering will increase the Bank's capacity to further leverage operating
expenses through continuation of its growth strategy. Overall, the general
trends in the Bank's net interest margin and operating expense ratio since
fiscal 1993 has resulted in a slight decline in the Bank's core earnings, as
indicated by a decline in the Bank's expense coverage ratio (net interest income
divided by operating expenses). Summit's expense coverage ratio equaled 1.28
times during fiscal 1993, versus a comparative ratio of 1.17 times during the
twelve months ended March 31, 1998. Similarly, Summit's efficiency ratio
(operating expenses, net of amortization of intangibles, as a percent of the sum
of net interest income and other operating income) of 77.1 percent for the
twelve months ended March 31, 1998 was less favorable than the 68.2 percent
efficiency ratio maintained during fiscal 1993.
Maintenance of generally favorable credit quality measures and the recovery
of the local real estate market have generally served to limit the impact of
loss provisions on the Bank's earnings in recent years. Loss provisions
established by the Bank amounted to 0.06 percent of average assets for the
twelve months ended March 31, 1998, which was consistent with the level of loss
provisions that has been established by Summit in recent years. As of March 31,
1998, the Bank maintained allowance for loan losses of $560,000, equal to 84.1
percent of non-performing assets and accruing loans that are more than 90 days
past due and
<PAGE>
RP Financial, LC.
Page 1.12
0.78 percent of net loans receivable. Exhibit I-6 sets forth the Bank's
allowance for loan loss activity during the past two and three-quarter fiscal
years.
Gains resulting from the sale of investment securities and loans have been
a factor in the Bank's earnings throughout the past five and three-quarter
fiscal years, ranging from a low of 0.21 percent of average assets during fiscal
1995 to a high of 0.73 percent of average assets during the twelve months ended
March 31, 1998. The gains recorded by the Bank have been primarily realized from
the sale of common stock equities. Accordingly, the gains recorded by the Bank
have been somewhat contingent upon market conditions for stocks and, thus,
should not necessarily be viewed as a sustainable component of Summit's
earnings. During fiscal 1996, the Bank also realized a gain from the sale of
foreclosed real estate which amounted to 0.16 percent of average assets.
In fiscal 1994, a change in accounting principle had a positive one-time
earnings impact on the Bank's earnings. The change in accounting principle
reflects the Bank's adoption of SFAS 109 "Accounting for Income Taxes" and
increased the Bank's after-tax earnings by $210,000 or 0.31 percent of average
assets.
Interest Rate Risk Management
The Bank pursues a number of strategies to manage interest rate risk, which
have been fairly effective in limiting the repricing mismatch between interest
rate sensitive assets and liabilities. As of March 31, 1998, the Bank maintained
a cumulative one year gap-to-assets ratio of negative 9.0 percent (see Exhibit
I-7).
The Bank primarily manages interest rate risk from the asset side of the
balance sheet, by purchasing short- and intermediate-term investments,
emphasizing the origination of 1-4 family ARM loans for the Bank's loan
portfolio, selling longer term fixed rate 1-4 family loans to the secondary
market, diversifying into other types of lending which consists primarily of
adjustable rate and short-term loans, and maintaining a relatively high balance
of liquid funds. As of March 31, 1998, of the total loans due after March 31,
1999, ARM loans comprised 62.4 percent of those loans (see Exhibit I-8). All of
the Bank's investments are classified as available for sale, and, thus, could be
readily sold if interest rate conditions warrant such action. On the liability
side of the balance sheet, management of interest rate risk is pursued through
maintaining a deposit composition which includes a relatively high
<PAGE>
RP Financial, LC.
Page 1.13
concentration of lower costing and less interest rate sensitive transaction and
savings accounts and utilizing longer term fixed rate FHLB advances.
The infusion of stock proceeds will serve to further limit the Bank's
interest rate risk exposure, as most of the net proceeds will be redeployed into
interest-earning assets and the increase to capital will lessen the proportion
of interest rate sensitive liabilities funding assets.
Lending Activities and Strategy
In recent years, the Bank's lending activities have traditionally
emphasized origination of 1-4 family mortgage loans (see Exhibits I-9 and I-10,
which reflect loan composition and lending activity, respectively). As of March
31, 1998, $45.7 million, or 62.8 percent, of Summit's total loan portfolio was
comprised of loans secured by 1-4 family permanent mortgage loans. Lending
diversification by the Bank has emphasized commercial real estate and
multi-family loans, which amounted to $12.1 million, or 16.7 percent, of total
loans outstanding at March 31, 1998. The balance of the loan portfolio consists
mostly of consumer loans and, to a lesser extent, construction and commercial
business loans. Exhibit I-11 provides the contractual maturity of the Bank's
loan portfolio, by loan type, as of March 31, 1998.
Summit originates both fixed rate and adjustable rate 1-4 family permanent
mortgage loans, retaining all ARM loan originations for portfolio. Currently,
fixed rate loan originations are generally sold to the secondary market, except
for 15-year fixed rate loans with an interest rate of 7.0 percent or higher.
Standard fixed rate loans offered by the Bank have terms ranging from 15 to 30
years. ARM loans offered by the Bank reprice every one or three years, and for
first time home buyers Summit offers an ARM loan which has an initial fixed rate
of interest for 5 years and then converts to a one-year ARM loan. ARM loans are
currently indexed to the comparable term U.S. Treasury securities rate, with the
initial rate of interest being dependent upon the length of the repricing term
(i.e., a higher rate is charged for loans with a initial 3-year repricing term).
Initial rates on ARM loans are typically discounted from the fully-indexed rate.
In the current interest rate environment, most of the Bank's 1-4 family lending
volume has consisted of fixed rate loans. Summit will originate 1-4 family loans
up to a loan-to-value ("LTV") ratio of 95.0 percent, although private mortgage
insurance ("PMI") is typically required for loans with LTV ratios above 80.0
percent. Fixed rate loans sold by the Bank are generally sold on a servicing
released basis.
<PAGE>
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Page 1.14
The Bank's most notable area of lending diversification consists of
commercial real estate and multi-family loans, which are collateralized by
properties in the Bank's normal lending territory. Such loans are typically
extended up to a LTV ratio of 80.0 percent and require a minimum debt-coverage
ratio of 1.25 times. Commercial real estate and multi-family loans are offered
both as ARM and fixed rate loans. Typical terms for ARM loans provide for a
three year repricing term, with a 20 year amortization. Fixed rate loans are
amortized for up to 30 years, but typically have a balloon provision of 10 to 20
years. Properties securing the commercial real estate and multi-family loan
portfolio include office buildings, churches, gas stations, office warehouses,
and apartments. Commercial real estate and multi-family loans extended by the
Bank are generally in the $150,000 to $500,000 range. As of March 31, 1998, the
Bank's largest commercial real estate loan had an outstanding balance of
$748,000 and was secured by a warehouse. The loan was performing in accordance
with its terms, as of March 31, 1998. Commercial real estate lending has been an
a lending growth area for the Bank in recent years, as Summit has been effective
in establishing a lending niche to serve borrowers that need loans that are
viewed as being too small to be effectively serviced by the larger commercial
banks.
The balance of the mortgage loan portfolio consists of construction loans.
As of March 31, 1998, the Bank's construction loan portfolio totaled $3.9
million, or 5.3 percent, of total loans outstanding. Construction loans
originated by the Bank consist primarily of loans to finance the construction of
1-4 family residences and to a lesser extent to finance commercial properties.
Most of the Bank's construction lending activities for 1-4 family houses consist
of speculative construction loans, while commercial real estate construction
loans are only offered as construction/permanent loans. To control the risk
associated with speculative construction lending, the Bank typically limits the
builder to one spec loan at a time and generally confines originations to
builders who have maintained a favorable credit quality history with Summit.
Construction loans require payment of interest only during the construction
period, which is typically 12 months. For construction loans, the Bank will lend
up to a maximum LTV ratio of 80.0 percent.
Diversification into non-mortgage lending consists primarily of consumer
loans and, to a lesser extent, commercial business loans. As of March 31, 1998,
the Bank's consumer loan portfolio totaled $7.6 million, or 10.4 percent of
total loans outstanding. Home equity loans, which totaled $5.2 million at March
31, 1998, comprise the largest component of the consumer loan portfolio. The
Bank's home equity loan portfolio includes both fixed term loans and lines of
credit. Home equity loans are limited to a maximum LTV ratio of 80.0
<PAGE>
RP Financial, LC.
Page 1.15
percent of the combined balance of the home equity loan and the first lien.
Fixed term home equity loans are amortized for terms of up to 10 years, while
home equity lines of credit may be extended for up to 15 years (5 year draw
period and 10 year repayment period). Beyond home equity loans, the Bank's
diversification into consumer loans has been fairly limited. Other loans
comprising the consumer loan portfolio include direct auto loans and various
other types of installment loans, as well as a modest amount of outstanding
credit card balances.
The balance of the loan portfolio consists of commercial business loans,
which totaled $3.5 million, or 4.8 percent, of total loans outstanding at March
31, 1998. Commercial business loans held by the Bank include secured and
unsecured loans which are extended to local businesses. Commercial business
loans are extended as both fixed rate loans and floating rate loans tied to the
Prime rate. Fixed rate loans generally have terms of seven years or less.
Commercial business lending is a desired growth area for the Bank, in which
Summit is targeting small businesses in the local market area. In this regard,
the Bank is offering one day approval for lines of credit of less than $50,000,
with approval being based on a credit scoring system model that has been
acquired by Summit.
Exhibit I-10, which shows the Bank's loan originations, purchases, sales
and repayments over the past two and three-quarter fiscal years, further
highlights that Summit's area of lending emphasis has been 1-4 family permanent
mortgage loans. Originations and purchases of 1-4 family permanent mortgage
loans accounted for 50.3 percent of the Bank's total lending and purchase volume
during the past two and three-quarter fiscal years. Originations of other loan
types have been fairly evenly distributed among commercial real
estate/multi-family, construction, commercial business and consumer loans over
the past two and three-quarter fiscal years; however, commercial real estate and
multi-family loans have been the most notable area of loan growth for the Bank,
due to the generally longer terms of those loans. Loans purchased by the Bank
consist substantially of 1-4 family ARM loans which are retained for the Bank's
loan portfolio. Growth of the 1-4 family loan portfolio has been somewhat
limited by the sale of fixed rate loan originations, which ranged from a low of
$361,000 during fiscal 1996 to a high of $5.4 million during the nine months
ended March 31, 1998. Summit has recorded positive loan growth over the past two
and one-half fiscal years, with the most notable growth occurring during fiscal
1996. The strong loan growth recorded during fiscal 1996 was supported by lower
loan sales and loan repayments, as opposed to higher originations and purchases.
Going forward, the Bank's lending strategy is to place a greater emphasis on the
origination of commercial real estate and commercial business loans,
<PAGE>
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Page 1.16
although the origination of 1-4 family permanent mortgage loans is expected to
remain as the Bank's most prominent lending activity.
Asset Quality
The Bank's 1-4 family lending emphasis has generally supported favorable
credit quality measures. Over the past two and three-quarter fiscal years,
Summit's balance of non-performing assets and accruing-loans that are more than
90 days past due ranged from a high of 1.04 percent of assets at fiscal year end
1996 to a low of 0.51 percent of assets at March 31, 1998. The decline in the
non-performing assets ratio has been supported by asset growth and a reduction
in the balance of non-accruing commercial business loans. Summit held $449,000
of non-accruing commercial business loans at fiscal year end 1996, versus a
comparative balance of $28,000 at March 31, 1998. As shown in Exhibit I-12, the
Bank held $343,000 of non-accruing loans, $323,000 of accruing loans that are
more than 90 days past due and a zero balance of foreclosed assets, as of March
31, 1998. Non-performing loans held by the Bank at March 31, 1998 consisted
primarily of 1-4 family permanent mortgage loans.
The Bank reviews and classifies assets on a regular basis and establishes
loan loss provisions based on the overall quality, size and composition of the
loan portfolio, as well other factors such as historical loss experience,
industry trends and local real estate market and economic conditions. At March
31, 1998, the Bank had $661,000 of assets classified as Substandard and $27,000
of assets classified as Doubtful. The Bank maintained valuation allowances of
$560,000 at March 31, 1998, equal to 0.78 percent of net loans receivable and
84.1 percent of non-performing assets and accruing loans that are more than 90
days past due.
Funding Composition and Strategy
Deposits have consistently been the Bank's primary source of funds and at
March 31, 1998 deposits accounted for 89.7 percent of Summit's interest-bearing
funding composition. Exhibit I-13 sets forth the Bank's historical deposit
composition and Exhibit I-14 provides the interest rate and maturity composition
of the CD portfolio at March 31, 1998. Savings and transaction accounts
represent the largest component of the Bank's deposit composition, with such
deposits amounting to $58.4 million, or 53.9 percent, of total deposits at March
31, 1998. In recent years, the Bank's concentration of transaction and savings
accounts comprising total deposits has declined slightly, with such deposits
amounting to 59.0 percent
<PAGE>
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Page 1.17
of total deposits at fiscal year end 1995. The decline in the concentration of
transaction and savings accounts comprising total deposits has been the result
of a stronger growth rate realized in CDs, as opposed to shrinkage being
experienced in the balance of transaction and savings account deposits.
CDs comprise the balance of the Bank's deposit composition, with Summit's
current CD composition reflecting a higher concentration of short-term CDs
(maturities of one year or less). As of March 31, 1998, the CD portfolio totaled
$49.8 million, or 46.1 percent, of total deposits, with 84.9 percent of those
CDs having maturities of one year or less. As of March 31, 1998, jumbo CDs (CD
accounts with balances of $100,000 or more) amounted to $7.8 million, or 15.6
percent, of total CDs. The Bank does not hold any brokered CDs. Deposit rates
offered by the Bank are generally in the middle-to-upper end of the range of
rates offered by local competitors.
Borrowings have been utilized to a greater degree by the Bank in recent
years, to facilitate leverage of the balance sheet and to support management of
interest rate risk. The Bank's borrowings totaled $12.4 million at March 31,
1998, consisting entirely of FHLB advances. Most of the borrowings have fixed
rate terms of more than five years, but are callable in less than one year.
Exhibit I-15 provides further detail of Summit's borrowing activities during the
past two and three-quarter fiscal years. Summit's deposit growth, internal
funding and stock proceeds are expected to be adequate enough to fund the
substantial portion of the Bank's lending and investment activities for the
intermediate-term. To the extent additional borrowings are utilized by the Bank,
such borrowings are expected to consist primarily of FHLB advances.
Subsidiaries
Summit maintains two investment subsidiaries: Medway Securities Corp. and
Franklin Village Security Corp. The subsidiaries were formed to take advantage
of favorable state tax treatment of interest income from certain investment
securities. As of March 31, 1998, Medway Securities Corp. and Franklin Village
Security Corp. held $22.5 million and $3.0 million of assets, respectively,
consisting of equities and bonds classified as available for sale.
<PAGE>
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Page 1.18
Legal Proceedings
The Bank is involved in routine legal proceedings occurring in the ordinary
course of business which, in the aggregate, are believed by management to be
immaterial to the financial condition of the Bank.
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Page 2.1
II. MARKET AREA
Introduction
Headquartered in Medway, Massachusetts, Summit serves the Greater Boston
Area through five full service branches. All five of the branches are located in
Norfolk County, which is southwest of Boston. The Bank's market area can be
characterized as being primarily urban or suburban in nature. Exhibit II-1
provides information on the Bank's office facilities.
Consistent with large metropolitan areas in general, the economy in the
Bank's market area is based on a mixture of service, manufacturing,
wholesale/retail trade, and state and local government. The market area economy
suffered a downturn in terms of economic activity and real estate values in the
late-1980s and early-1990s -- in lockstep with the national recession. However,
more recently, the Boston economy has rebounded from the downturn, which can be
attributed to an improved national economy and a resulting increase in demand
for the products and services produced by the Boston economy. Maintaining
operations in a large metropolitan area serves as a benefit to the Bank in
periods of economic growth, while at the same time fosters significant
competition for the financial services provided by Summit. The Bank's
competitive environment includes a large number of thrifts, commercial banks,
and other financial services companies, some of which have a regional or
national presence.
Future growth opportunities for Summit depend in part on national economic
factors, the future growth in the Bank's market area, which has been measured by
indicators such as demographic growth trends, the health and stability of the
regional and local economy, and the nature and intensity of the competitive
environment for financial institutions. These factors have been briefly examined
to help determine the growth potential that exists for the Bank and the relative
economic health of the Bank's market area.
Market Area Demographics
Demographic growth in the Bank's market area has been measured by changes
in population, number of households and median household income, with trends in
those areas summarized by the data presented in Table 2.1. Norfolk County
experienced positive population growth during the 1990s, with the County
exhibiting a higher growth rate than the comparable growth rate posted by
Massachusetts and a lower growth rate than exhibited by the U.S. Population
growth has been supported by the outward expansion of the Boston MSA,
<PAGE>
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Page 2.2
Table 2.1
Summit Bank
Summary Demographic Data
<TABLE>
<CAPTION>
Year
---------------------------------- Growth Rate Growth Rate
Population (000) 1990 1997 2002 1990-97 1997-2002
---------------- ---- ---- ---- ------- ---------
<S> <C> <C> <C> <C> <C>
United States 248,710 267,805 281,209 1.1% 1.0%
Massachusetts 6,016 6,113 6,181 0.2% 0.2%
Norfolk County 616 641 658 0.6% 0.5%
Households (000)
----------------
United States 91,947 99,020 104,001 1.1% 1.0%
Massachusetts 2,247 2,316 2,368 0.4% 0.4%
Norfolk County 228 241 250 0.8% 0.8%
Median Household Income ($)
---------------------------
United States $29,199 $36,961 $42,042 3.4% 2.6%
Massachusetts 36,286 42,084 45,253 2.1% 1.5%
Norfolk County 46,132 51,352 53,210 1.5% 0.7%
Per Capita Income -($)
----------------------
United States $13,179 $18,100 ---- 4.6% N/A
Massachusetts 16,241 20,310 ---- 3.2% N/A
Norfolk County 19,867 24,273 ---- 2.9% N/A
1997 Age Distribution(%) 0-14 Years 15-24 Years 25-44 Years 45-64 Years 65+ Years Median Age
------------------------ ---------- ----------- ----------- ----------- --------- ----------
United States 21.7 13.6 31.4 20.5 12.7 34.8
Massachusetts 20.2 12.8 33.2 20.4 13.4 35.4
Norfolk County 19.6 10.8 33.7 21.8 14.1 36.8
Less Than $15,000 to $25,000 to $50,000 to $100,000 to
1997 HH Income Dist.(%) $15,000 25,000 $50,000 $100,000 $150,000 $150,000+
----------------------- ------- ------ ------- -------- -------- ---------
United States 17.7 14.4 33.5 26.5 5.4 2.6
Massachusetts 16.4 11.3 31.2 31.4 6.7 3.0
Norfolk County 11.5 8.8 28.0 36.8 9.6 5.3
</TABLE>
Source: CACI.
<PAGE>
RP Financial, LC.
Page 2.3
with Norfolk County's proximity to Boston and more affordable housing serving as
attractive characteristics to individuals who maintain jobs in the Boston MSA.
Population growth for Norfolk County is projected to remain above the
comparative Massachusetts growth rate over the next five years through 2002,
while remaining below the projected population growth rate for the U.S. Growth
in the number of households paralleled population growth, as Norfolk County
recorded a higher rate of household growth from 1990 to 1997 compared to
Massachusetts and a lower growth rate compared to the U.S. The increased demand
for housing resulting from the population growth has had a positive impact on
real estate values in Norfolk County in recent years, which is viewed as being
favorable for the Bank in terms of limiting credit risk exposure as well as
providing opportunities for loan growth.
Median household and per capita income levels in Norfolk County were higher
than the comparative medians for Massachusetts and the U.S., reflecting the
relative affluence of the market area which serves as home to a high
concentration of white collar professionals who work in Boston and other nearby
markets that are closer to the City than Norfolk County. Household income
distribution measures further imply the greater wealth of the suburban markets
which comprise Norfolk County, as income distribution measures for Norfolk
County reflect a higher earning population compared to Massachusetts and the
U.S. In comparison to the U.S. and Massachusetts, growth in household income was
lower for Norfolk County from 1990 to 1997. Consistent with projected household
income for the U.S. and Massachusetts, household income growth for Norfolk
County is projected to slow over the next five years. The projected general slow
down in household income reflects that most of the job growth is being realized
in service related jobs, which tend to relatively low paying jobs. Based on
these demographic trends, the markets served by the Bank are viewed as being
supportive of providing opportunities for lending and deposit growth.
National Economic Factors
Over the past year, national economic growth has been mixed. Second quarter
economic data for 1997 generally reflected a less robust pace of growth than
maintained during the first quarter. Most notably, a lower than anticipated
National Association of Purchasing Managers index in April 1997 indicated a
slowdown of expansion in the manufacturing sector. New home sales also dropped
by 7.7 percent in April 1997, the sharpest decline in six months. Automobile
sales for April and May declined from year earlier levels, and discounting
became more common by automakers. A rise in the June unemployment rate and GDP
<PAGE>
RP Financial, LC.
Page 2.4
growth slowing to an annual rate of 2.2 percent in the second quarter, which was
well below the revised 4.9 percent rate recorded in the first quarter, further
signaled that the economy was slowing to a more sustainable pace.
Economic data released in August 1997 provided mixed signals of economic
growth, as a decline in the July unemployment rate and an unexpectedly sharp
decline in the U.S. trade deficit provided indications of a strengthening
economy. At the same time, a modest increase in the July consumer price index
and a decline in July wholesale prices suggested that inflation remained
non-threatening. At the end of August, the second quarter GDP was revised upward
to a 3.6 percent annual growth rate compared to a 2.2 percent original estimate.
In early-September, a slight increase in the August unemployment rate did little
to alleviate inflation concerns, as the employment data indicated that the job
market remained tight and wages continued to rise. Comparatively, only a slight
increase in the August consumer price index provided evidence that inflation
remained tame at the end of the third quarter. September unemployment data
served to further calm inflation fears in early-October, as the unemployment
rate was unchanged at 4.9 percent and fewer jobs than expected were added to the
economy.
At the beginning of the fourth quarter of 1997, inflation concerns became
more notable following congressional testimony by the Federal Reserve Chairman,
as he indicated that it would be difficult for the U.S. economy to maintain the
current balance between tight labor markets and low inflation. However, economic
data released in October and November provided mixed signals on the strength of
the economy. For example, a decline in the October unemployment rate to a
24-year low of 4.7 percent indicated a rapidly expanding economy, while,
comparatively, a decline in October retail sales suggested that the economy may
be slowing. Economic growth was also viewed as being contained by the upheaval
in Asian markets, based on expectations that international turmoil would result
in a drop in demand for U.S. exports. However, the threat of inflation was
rekindled in early-December on news of the November unemployment rate dropping
to 4.6 percent, as the tight labor market pushed hourly wages higher. Economic
data released in mid-December provided for a more favorable inflation outlook,
since the increase in November retail sales was well below economists
expectations and producer prices declined in November.
Inflation concerns were further eased in early-January 1998 on news that
U.S. manufacturing growth slowed in December and predictions by economists of
slower growth for the U.S. economy in 1998. However, December 1997 employment
data indicated robust
<PAGE>
RP Financial, LC.
Page 2.5
economic growth, despite a 0.1 percent increase in the December unemployment
rate to 4.7 percent, as a higher than expected 370,000 jobs were added to the
U.S. economy in December. The growing demand for labor translated into a higher
than expected increase in labor costs during the fourth quarter of 1997. A 0.5
percent increase in industrial production for December 1997 and a 4.3 percent
increase in the GDP for the fourth quarter of 1997 further suggested that the
financial troubles in Asia had not diminished demand for U.S. exports by the end
of 1997. At the end of January 1998, inflation concerns were diminished by the
December durable goods orders report, which showed only a slight increase after
excluding the volatile transportation sector. The January unemployment rate was
unchanged at 4.7 percent, while the number of jobs added to the economy was
higher than expected. Other economic data released in February 1998 generally
signaled a stable economic environment. Retail sales were up 0.1 percent in
January 1998 versus 0.3 percent in December 1997, while the consumer price index
for January was unchanged from December. At the end of February fourth quarter
GDP was revised downward to 3.9 percent, signaling a possible slowdown in growth
in the early part of 1998.
Economic data released in early-March 1998 provided mixed economic signals,
with a decline in the February unemployment rate to 4.6 percent being indicative
of a robust U.S. economy. However, the February employment data also reflected a
decline in manufacturing jobs, which suggested that the growth may not be
sustainable. A decline in February producer prices and plunging oil prices
further eased inflation concerns in mid-March 1998. However, the February CPI
reflected an accelerating economy, after factoring out the sharp decline in
energy prices, indicating that competition from cheap Asian imports hadn't yet
forced many U.S. companies to lower prices. At the end of March, data which
showed a record pace for new and existing home sales in February further
signaled a strong U.S. economy. Tight labor markets were a further indication of
the growing U.S. economy, as inflation adjusted wages for the lowest paid
workers started to rise in 1997, reversing a 25-year economic trend in the U.S.
economy. While the March employment data reflected a loss of jobs and an
increase in the unemployment rate to 4.7 percent from 4.6 percent in February,
the decline in economic activity was believed to be mostly weather-related. A
slower pace of economic growth was also indicated by a slight decline in March
retail sales and consumer prices stayed flat during March.
First quarter 1998 GDP growth of 4.2 percent signaled a strong pace of
economic growth, although inflation remained in-check. The favorable inflation
data included
<PAGE>
RP Financial, LC.
Page 2.6
decelerating labor costs during the first quarter of 1998 compared to the fourth
quarter of 1997 and the price index for gross domestic purchases was flat during
the first quarter. The April 1998 employment data showed a surprising decline in
the unemployment rate to 4.3 percent, the lowest level since February 1970.
However, inflation concerns that were raised by the sharp decline in the
unemployment rate were somewhat eased by a decline in manufacturing employment,
suggesting that the economy may be slowing. Comparatively, consumer prices rose
0.2 percent in April, which was the largest increase in six months. Overall,
however, the April economic data indicated that inflation continued to be
contained, as the annual core rate of inflation was measured at just 2.1
percent. At the end of May, first quarter GDP growth was revised upward to a
stronger than expected 4.8 percent annual growth rate; however, much of the
growth was due to the build-up of inventories.
Consistent with the mixed economic activity, interest rate trends have been
varied as well over the past year. News of the budget agreement and favorable
inflation data provided for a rally in bond prices in early-May 1997. Interest
rates stabilized in mid-May, as the Federal Reserve opted not to raise interest
rates at its May meeting. The high level of consumer confidence indicated by the
May reading caused the 30-year bond yield to edge above 7.0 percent again in
late-May. However, the increase was short-lived, as signs of slowing economic
growth provided for a lower interest rate environment during June.
The downward trend in interest rates became more pronounced during July
1997, following the Federal Reserve's decision to leave rates unchanged at its
early-July meeting and the release of new economic data that indicated inflation
was under control. Slower economic growth indicated by a second quarter GDP
growth rate of 2.2 percent sustained the rally in bond prices at the end of
July. However, in early-August, the stronger than expected job growth reflected
in the July employment data and a falling U.S. dollar against the yen and mark
caused bond prices to tumble. After recovering briefly on the favorable
inflation readings reflected in the July wholesale and retail prices, bond
prices declined in late-August on news of the narrower than expected June trade
deficit. Bond prices rallied briefly at the end of August and in
early-September, due to technical pressures and economic data that showed
manufacturing growth cooled in August. Interest rates increased slightly in
mid-September, reflecting investor fears that the August economic data would
show a strengthening economy and higher prices. However, the low inflation
reading indicated by the August consumer price report ignited a bond market
rally, with the yield on the 30-year bond posting its second largest decline in
the 1990s on September 16, 1997. Bond prices approached their
<PAGE>
RP Financial, LC.
Page 2.7
highest level in two years in early-October, reflecting the stable inflation
environment as confirmed by the September unemployment data.
In mid-October 1997, renewed inflation fears raised by the tight labor
markets and growing expectations of a rate hike by the Federal Reserve provided
for an easing in bond prices. The sell-off in the global markets at the end of
October served to abbreviate the decline in bond prices, as skittish investors
dumped stocks in favor of bonds. The Federal Reserve's decision to leave
interest rates unchanged at its mid-November meeting, along with signs of
slowing economic growth indicated by a decline in October retail sales, served
to strengthen the advance in bond prices in mid-November as the yield on the
bellwether 30-year U.S. Treasury bond approached 6.0 percent. Renewed interest
in U.S. Treasury bonds by Japanese investors and fading concerns of inflation
provided for a stable bond market in late-November. The rally in bond prices was
not sustained in early-December, as bond prices declined on news of the
surprisingly strong jobs report for November. However, positive inflation news
indicated by the lower than expected increase in November retail sales and the
decline in November producer prices, as well as world market turmoil, served to
push the yield on the 30-year U.S. Treasury bond below 6.0 percent in
mid-December. Bond prices were further boosted in mid-December by the Federal
Reserve's decision to leave interest rates unchanged at its mid-December
meeting, while a flight to quality caused by lingering concerns over the
long-term stability of Asian financial markets sustained the advance in the bond
market in late-December.
Comments by the Federal Reserve Chairman of possible deflationary pressures
served to strengthen the bond market rally at the beginning of 1998. December
1997 economic data which generally showed a strong pace of economic growth
caused bond prices to retreat slightly in late-January 1998. Bonds rallied
briefly at the end of January, as the Federal Reserve indicated that it would
hold rates steady. In early-February, gains in the stock market translated into
a sell-off in bonds. However, despite the stronger than expected employment
report for January, bond prices edged higher following the release of the
employment data on the first Friday in February. The positive trend in bond
prices was sustained through mid-February, which was supported by economic data
which showed a slower pace of growth. Indications by the Federal Reserve
Chairman that the Federal Reserve would not cut rates soon pushed interest rates
slightly higher in late-February. However, the downward revision to fourth
quarter GDP boosted bond prices modestly at the end of February.
<PAGE>
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Page 2.8
At the beginning of March 1998, signs of a strengthening U.S. economy
pushed the yield on the 30-year bond above 6.0 percent for the first time in
three months. However, the decline in bond prices was short-lived, as declining
oil prices and news of a 1.6 percent decline in February producer prices served
to edge the 30-year bond year back below 6.0 percent in mid-March. The 30-year
bond yield approached 6.0 percent again in late-March, as the economic strength
indicated by the new and existing home sales reports for February heightened
speculation that the Federal Reserve would raise interest rates. At its
late-March meeting the Federal Reserve elected to leave interest rates
unchanged, which along with the slight increase in the March unemployment rate,
provided for a mild rally in bond prices during late-March and early-April.
Indications of slower economic growth, such as a decline in March retail
sales, provided for a fairly stable interest rate environment through mid-April
1998. Speculation that the Federal Reserve was leaning towards increasing
interest rates triggered a sell-off in bonds during late-April, as the 30-year
bond yield moved above 6.0 percent. However, the downturn was abbreviated by the
favorable inflation data reflected for labor costs during the first quarter of
1998, which pushed the yield on the 30-year bond back below 6.0 percent at the
end of April. News of the sharp decline in the April unemployment rate
translated into slightly higher interest rates in early-May, reflecting concerns
that the tight labor market would result in higher labor costs. Comparatively,
interest rates edged lower in mid-May, with turmoil in the Asian markets and the
Federal Reserve's decision not to raise interest rates at its May meeting being
noted as reasons for the decline in interest rates. A flight to quality served
to preserve the positive trend in bond prices through the end of May, reflecting
worries about the Russian economy and tensions between India and Pakistan. As of
May 29, 1998, one- and thirty-year U.S. Government bonds were yielding 5.42
percent and 5.80 percent, respectively, versus comparative year ago rates of
5.83 percent and 6.98 percent. Exhibit II-2 provides historical interest rate
trends from 1991 through May 29, 1998.
Local Economy
Norfolk County's local economy is reflective of an economy with a large
commuter population, with services and wholesale/retail trade serving as the
basis of the local economy. The manufacturing industry, once the backbone of
local economy, remains a notable employment sector in Norfolk County. However,
the number of manufacturing jobs in Norfolk County reflects a shrinking trend.
Service jobs account for the largest employment
<PAGE>
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Page 2.9
sector in Norfolk County (37.6 percent of total jobs), followed by employment in
wholesale/retail trade (20.9 percent of total jobs). Jobs in manufacturing
constituted the third largest employment sector in Norfolk County, with such
jobs comprising 12.3 percent of the employment in Norfolk County. Demographic
growth has facilitated job growth in most sectors of the local economy, with
services, wholesale/retail trade and construction experiencing the strongest job
growth in Norfolk County. Job shrinkage has been most notable in the
manufacturing sector, with manufacturing jobs declining from 14.2 percent of
Norfolk County's labor force in 1991 to 12.3 percent in 1995 (the most recent
data available).
Comparative unemployment rates for Norfolk County, as well as for the U.S.
and Massachusetts, are shown in Table 2.2. The unemployment data for the market
area further implies a healthy local economy that should facilitate growth
opportunities for the Bank, as Norfolk County's unemployment rate was lower than
the comparative measures for the U.S. and Massachusetts. Similar to the U.S. and
Massachusetts, the March 1998 unemployment rate for Norfolk County was lower
compared to a year ago.
Table 2.2
Unemployment Trends(1)
March 1997 March 1998
Region Unemployment Unemployment
United States 5.5% 5.0%
Massachusetts 4.6 4.2
Norfolk County 3.4 3.0
- -------------
(1) Unemployment rates have not been seasonally adjusted.
Source: U.S. Bureau of Labor Statistics.
Market Area Deposit Characteristics and Competition
Competition among financial institutions in the Bank's market area is
significant, and, as larger institutions compete for market share to achieve
economies of scale, the market environment for the Bank's products and services
is expected to become increasingly competitive in the future. Smaller
institutions such as Summit will be forced to either compete
<PAGE>
RP Financial, LC.
Page 2.10
with larger institutions on pricing, or to identify and operate in a "niche"
that will allow for operating margins to be maintained at profitable levels.
The Bank's retail deposit base is closely tied to the economic fortunes of
the Norfolk County and, in particular, in areas that are nearby to one of
Summit's five branches. Table 2.3 displays deposit market trends from June 30,
1995 through June 30, 1997 for the four branches maintained by the Bank during
that period. The Bank's fifth branch office was opened in August 1997 and is
located in Franklin. Additional data is also presented for the State of
Massachusetts. The data indicates that deposit growth in the Bank's primary
market area was negative, with the most notable disintermediation occurring at
saving institutions. In contrast to the State of Massachusetts, savings
institutions maintained a higher concentrations of deposits than commercial
banks in Norfolk County. However, as the result of the more notable decline in
deposits experienced by savings institutions during the period covered in Table
2.3, the deposit market share for commercial bank deposits in Norfolk County
increased from 41.2 percent to 43.3 percent at June 30, 1995 and June 30, 1997,
respectively. Comparatively, the deposit market share for Norfolk County savings
institutions declined from 58.8 percent to 56.7 percent over the same time
period.
Summit recorded strong deposit growth during the period covered in Table
2.3, which served to increase the Bank's market share of total bank and thrift
deposits in Norfolk County from 0.7 percent as of June 30, 1995 to 1.0 percent
as of June 30, 1997. However, as highlighted by the relatively low market share
of deposits maintained by the Bank, competition for deposits in the primary
market served by Summit is significant and includes a number of financial
institutions with greater resources than maintained by the Bank.
Future deposit growth may be enhanced by the infusion of the stock
proceeds, as the additional capital will improve Summit's competitive position
and leverage capacity. The Bank should also continue to benefit from its
favorable image as a locally-owned and community-oriented institution, as the
trend of consolidation among financial institutions is expected to provide
Summit with additional opportunities to acquire customers, facilities and key
personnel that become available as the result of community banks being acquired.
Deposit growth may also be enhanced by establishing additional branches that
would support further penetration of markets currently served by the Bank or
expansion into nearby contiguous markets.
<PAGE>
RP Financial, LC.
Page 2.11
Table 2.3
Summit Bank
Deposit Summary
<TABLE>
<CAPTION>
As of June 30,
---------------------------------------------------------------------------
1995 1997
----------------------------------- ------------------------------------- Deposit
Market Number of Market No. of Growth Rate
Deposits Share Branches Deposits Share Branches 1995-1997
-------- ----- -------- -------- ----- -------- ---------
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
State of Massachusetts ..... $101,786,573 100.0% 1,925 $114,049,442 100.0% 1,899 5.9%
- ----------------------
Commercial Banks ..... 60,145,213 59.1% 1,011 69,913,023 61.3% 942 7.8%
Savings Institutions.. 41,641,360 40.9% 914 44,136,419 38.7% 957 3.0%
Norfolk County ............. $ 9,430,558 100.0% 205 $ 8,962,396 100.0% 203 -2.5%
- --------------
Commercial Banks ..... 3,886,346 41.2% 98 3,876,724 43.3% 98 -0.1%
Savings Institutions.. 5,544,212 58.8% 107 5,085,672 56.7% 105 -4.2%
Summit Bank .......... 69,917 0.7% 4 92,909 1.0% 4 15.3%
</TABLE>
Source: FDIC; OTS.
<PAGE>
RP Financial, LC.
Page 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of Summit's operations versus a group of
comparable companies (the "Peer Group") selected from the universe of all
publicly-traded savings institutions. The primary basis of the pro forma market
valuation of Summit is provided by these public companies. Factors affecting the
Bank's pro forma market value such as financial condition, credit risk, interest
rate risk, and recent operating results can be readily assessed in relation to
the Peer Group. Current market pricing of the Peer Group, subject to appropriate
adjustments to account for differences between Summit and the Peer Group, will
then be used as a basis for the valuation of Summit's to-be-issued common stock.
Peer Group Selection
The mutual holding company form of ownership has been in existence in its
present form since 1991. As of the date of this appraisal, there were
approximately 20 publicly-traded institutions operating as subsidiaries of MHCs.
We believe there are a number of characteristics of MHC shares that make them
different from the shares of fully-converted companies. These factors include:
(1) lower aftermarket liquidity in the MHC shares since less than 50 percent of
the shares are available for trading; (2) guaranteed minority ownership
interest, with no opportunity of exercising voting control of the institution in
the MHC form of organization, thus limiting acquisition speculation in the stock
price; (3) the potential impact of "second step" conversions on the pricing of
public MHC institutions; (4) the FDIC policy regarding the dividend waiver by
MHC institutions; and (5) certain MHCs have formed or are forming middle-tier
holding companies, facilitating the ability for stock repurchases, thus
improving the liquidity of the stock on an interim basis. We believe that each
of these factors has an impact on the pricing of the shares of MHC institutions,
and that such factors are not reflected in the pricing of fully-converted public
companies.
Given the unique characteristic of the MHC form of ownership, RP Financial
concluded that the appropriate Peer Group for Summit's valuation should be
comprised of the subsidiary institutions of mutual holding companies. The Peer
Group is consistent with the regulatory guidelines, and other recently completed
MHC transactions. Further, the Peer Group should be comprised of only those MHC
institutions whose common stock is either listed on a national exchange or is
NASDAQ listed, since the market for companies trading in this fashion is regular
and reported. We believe non-listed MHC institutions are inappropriate
<PAGE>
RP Financial, LC.
Page 3.2
for the Peer Group, since the trading activity for thinly-traded stocks is
typically highly irregular in terms of frequency and price and may not be a
reliable indicator of market value. We have excluded from the Peer Group those
public MHC institutions that are currently pursuing a "second step" conversion
and/or companies whose market prices appear to be distorted by speculative
factors or unusual operating conditions. The universe of all publicly-traded MHC
institutions is included as Exhibit III-2. Institutions excluded from the
calculation of averages have been denoted with a footnote (7).
Basis of Comparison
This appraisal includes two sets of financial data and ratios for each
public MHC institution. The first set of financial data reflects the actual book
value, earnings, assets and operating results reported by the public MHC
institutions in its public filings inclusive of the minority ownership interest
outstanding to the public. The second set of financial data, discussed at length
in the following chapter, places all of the public MHC institutions on equal
footing by restating their financial data and pricing ratios on a
"fully-converted" basis assuming the sale of the majority shares held by the
MHCs in public offerings based on their respective current prices and standard
assumptions for a thrift conversion offering. Throughout the appraisal, the
adjusted figures will be specifically identified as being on a fully-converted
basis. Unless so noted, the figures referred to in the appraisal will be actual
financial data reported by the public MHC institutions.
Both sets of financial data have their specific use and applicability to
the appraisal. The actual financial data, as reported by the public MHC
institutions and reflective of the minority interest outstanding, will be used
primarily in this Chapter III to make financial comparisons between the Peer
Group and Summit. The differences between the Peer Group's reported financial
data and the financial data of Summit as a mutual institution are not
significant enough to distort the conclusions of the comparison (in fact, such
differences are greater in a standard conversion appraisal). The adjusted
financial data (fully-converted basis) will be more fully described and
quantified in the pricing analysis discussed in Chapter IV of the appraisal. The
fully-converted pricing ratios are considered critical to the valuation analysis
in Chapter IV, because they place each public MHC institution on a
fully-converted basis (making their pricing ratios comparable to the pro forma
valuation conclusion reached herein), eliminate distortion in pricing ratios
between public MHC institutions that have sold different percentage ownership
interests to the public, and reflect the actual pricing ratios (fully-
<PAGE>
RP Financial, LC.
Page 3.3
converted basis) being placed on public MHC institutions in the market today to
reflect the unique trading characteristics of public MHC institutions.
Selection of Peer Group
Under ideal circumstances, the Peer Group would be comprised of ten
publicly-traded Massachusetts-based MHC institutions with capital, earnings,
credit quality and interest rate risk comparable to Summit. However, the
universe of 20 public MHC institutions only includes one institution
headquartered in Massachusetts (Brookline Bancorp). Out of the 20 public MHCs,
19 were included for the Peer Group. Pulaski Bank of Missouri was excluded from
the group, as the result of announcing plans to complete a second-step
conversion and, thus, its pricing ratios have become distorted in anticipation
of the second-step appraisal.
Unlike the universe of public companies, which includes approximately 360
public companies, the universe of public MHC institutions is small, thereby
limiting the prospects of a relatively comparable Peer Group. Nonetheless,
because the trading characteristics of public MHC institution shares are
significantly different from those of fully-converted companies, the universe of
19 public MHC institutions was the most appropriate group for this valuation.
Relying solely on full stock public companies for the Peer Group would not
capture the difference in current market pricing for public MHC institutions and
thus could lead to distorted valuation conclusions. The federal regulatory
agencies have previously concurred with this selection procedure of the Peer
Group for MHC valuations.
Potential shortcomings to using all 19 publicly-traded MHCs include the
variations in asset sizes, operating strategies, market areas (both regional and
local), and financial measures among the 19 public MHC institutions. Although we
considered these potential shortcomings in our analysis, RP Financial's ultimate
conclusion was that the size of the Peer Group was statistically meaningful
(i.e., there were enough institutions included to support meaningful
conclusions), the differences in financial and other characteristics among the
Peer Group members would, on average, be offsetting (i.e., the pricing reflected
in the exceptionally strong market in Florida would be offset by the weaker
market pricing of an institution operating in Iowa), and importantly the pricing
characteristics were more relevant than fully-converted institutions. To account
for differences between Summit and the MHC Peer Group in reaching a valuation
conclusion, it will be necessary to make certain valuation adjustments. The
following discussion addresses financial similarities and differences.
<PAGE>
RP Financial, LC.
Page 3.4
Table 3.1 on the following page lists key general characteristics of the
Peer Group companies. Although there are differences among several of the Peer
Group members, by and large they are well-capitalized and profitable
institutions and their decision to reorganize in MHC form itself suggests a
commonality of operating philosophy. Importantly, the trading prices of the Peer
Group companies reflect the unique operating and other characteristics of public
MHC institutions. While the Peer Group is not exactly comparable to Summit, we
believe such companies form a good basis for the valuation of Summit, subject to
certain valuation adjustments.
In aggregate, the Peer Group companies maintain a slightly lower level of
capitalization relative to the universe of all public thrifts (12.37 percent of
assets versus 13.50 percent for the all public average), generate lower core
earnings (0.76 percent ROA versus 0.90 percent average for the all public
average), and generate a lower core ROE (6.39 percent core ROE versus 7.96
percent for the all public average). Please note that RP Financial has used core
earnings in this discussion to eliminate the effects of non-operating items.
The summary table below underscores the key differences, particularly in
the average pricing ratios between full stock and MHC institutions (both as
reported and on a fully-converted basis).
Publicly-Traded MHCs
(Excluding Announced
Second Steps)
------------------------
Fully
All MHC Converted
Publicly-Traded Reported Basis
(Excluding MHCs) Basis (Pro Forma)
---------------- ----- -----------
Financial Characteristics (Averages)
Assets ($Mil) 1,443 1,228 1,406
Equity/Assets (%) 13.50% 12.37% 23.93%
Core Return on Assets (%) 0.90 0.76 1.07
Core Return on Equity (%) 7.96 6.39 4.42
Pricing Ratios (Averages)(1)
Core Price/Earnings (x)(2) 20.62x N.M. 23.87x
Price/Book (%) 167.54% 224.96% 105.61%
Price/Assets (%) 20.81 29.37 25.14
- ---------
(1) Based on market prices as of May 29, 1998.
(2) Core P/E multiple is not meaningful for publicly-traded MHCs on a reported
basis, as only one of the companies maintains a core P/E multiple of less
than 30 times.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
June 9, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ------ --------- ------ ------- ---- ---- ----- -----
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PBCT Peoples Bank, MHC of CT (40.1) (3) OTC Southwestern CT Div. 9,150 M 111 12-31 07/88 38.13 2,443
NBCP Niagara Bancorp of NY MHC(45.4 (3) OTC Northern NY Thrift 3,145 P 15 12/31 04/98 15.88 473
NWSB Northwest Bcrp MHC of PA (30.7 OTC Northwest PA Thrift 2,409 M 67 06-30 11/94 16.25 761
HARS Harris Fin. MHC of PA (24.3) OTC Harrisburg PA M.B. 2,260 M 33 12-31 01/94 25.50 866
BRKL Brookline Bncp MHC of MA(47.0) OTC Brookline Thrift 1,451 P 5 08-31 03/98 16.81 489
FFFL Fidelity Bcsh MHC of FL (47.7) OTC Southeast FL Thrift 1,321 M 20 12-31 01/94 30.06 204
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 761 M 21 12-31 10/94 35.38 180
FFSX First FSB MHC Sxld of IA(46.1) OTC Western IA Thrift 571 M 13 06-30 07/92 37.25 106
LFED Leeds Fed Bksr MHC of MD (36.3 OTC Baltimore MD Thrift 299 M 1 06-30 05/94 20.25 105
ALLB Alliance Bank MHC of PA (19.9) OTC Southeast PA Thrift 273 M 7 12-31 03/95 35.00 115
WAYN Wayne Svgs Bks MHC of OH (47.8 OTC Central OH Thrift 255 D 6 03-31 06/93 27.25 68
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 251 M 5 12-31 11/94 20.00 71
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 223 M 9 12-31 07/97 20.25 56
PBHC Pathfinder BC MHC of NY (46.1) (3) OTC Upstate NY Thrift 196 M 5 12-31 11/95 22.63 64
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 191 M 6 12-31 04/97 18.50 39
GBNK Gaston Fed Bncp MHC of NC(47.0 OTC Southwest NC Thrift 171 P 4 09-30 04/98 16.75 75
JXSB Jcksnville SB,MHC of IL (45.6) OTC Central IL Thrift 170 M 4 12-31 04/95 22.50 43
SKBO First Carnegie MHC of PA(45.0) OTC Western PA Thrift 144 D 3 03-31 04/97 19.88 46
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 95 D 1 12-31 08/94 19.63 41
</TABLE>
NOTES:
- -----------
(1) Or most recent date available (M=March, S=September, D=December, J=June,
E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage Banker,
R.E.=Real Estate Developer, Div.=Diversified, and Ret.=Retail Banking.
(3) FDIC savings bank institution.
Source: Corporate offering circulars, data derived from information published in
SNL Securities Quarterly Thrift Report, and financial reports of
publicly-traded thrifts.
Date of Last Update: 06/09/98
<PAGE>
RP Financial, LC.
Page 3.6
The following sections present a comparison of Summit's financial
condition, income and expense trends, loan composition, interest rate risk and
credit risk versus the figures reported by the Peer Group. The conclusions drawn
from the comparative analysis are then factored into the valuation analysis
discussed in the final chapter.
Financial Condition
Table 3.2 shows comparative balance sheet measures for Summit and the Peer
Group. Summit's and the Peer Group's ratios reflect balances as March 31, 1998,
unless otherwise indicated for the Peer Group companies. Summit's net worth base
of 7.5 percent was below the Peer Group's average net worth ratio of 11.6
percent; however, with the addition of stock proceeds, the Bank's pro forma
capital position (consolidated with the holding company) will likely be
comparable to the Peer Group's ratio. Summit's capital consisted entirely of
tangible capital, while the Peer Group's capital included a modest amount of
intangibles. The increase in the Bank's capital position to be realized from the
stock offering will serve to enhance future earnings potential that may be
realized through leverage and lower funding costs. However, at the same time,
the Bank's higher pro forma capital position will likely result in a decline in
return on equity. Both the Bank's and the Peer Group's capital ratios reflected
healthy capital surpluses over the regulatory capital requirements, with the
Peer Group's ratios currently indicating greater capital surpluses.
The interest-earning asset compositions for the Bank and the Peer Group
were somewhat similar, with loans constituting the bulk of interest-earning
assets for both Summit and the Peer Group. The Peer Group's combined level of
loans and mortgage-backed securities was higher than the Bank's ratio (71.0
percent of assets versus 60.6 percent for the Bank), as the Peer Group
maintained higher concentrations of both loans and mortgage-backed securities
relative to the Bank's measures. Comparatively, the Bank's cash and
investments-to-assets ratio was higher than the comparable ratio for Peer Group
(37.1 percent of assets versus 25.0 percent for the Peer Group). Overall,
Summit's interest-earning assets amounted to 97.7 percent of assets, which was
higher than the comparative Peer Group ratio of 96.0 percent.
Summit's funding liabilities reflected a funding strategy that was similar
to that of the Peer Group's funding composition. The Bank's deposits equaled
82.4 percent of assets, which was above the Peer Group average of 73.8 percent.
Borrowings were utilized to a slightly
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of March 31, 1998
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Invs. Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----- ----- --- -------- ----- ---- ----- -------- ----- ----------
Summit Bank
- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1998 ...................... 37.1 55.0 5.6 82.4 9.5 0.0 7.5 0.0 7.5 0.0
SAIF-Insured Thrifts .................. 19.0 67.5 10.2 68.9 15.6 0.2 13.4 0.2 13.2 0.0
All Public Companies .................. 19.4 66.7 10.6 69.3 15.5 0.1 13.1 0.3 12.8 0.0
Comparable Group Average .............. 25.0 59.7 11.3 73.8 10.8 0.1 11.6 0.3 11.3 0.0
Florida Companies ................... 17.8 66.3 12.1 73.4 14.9 0.0 8.8 0.1 8.7 0.0
Mid-Atlantic Companies .............. 26.6 53.9 15.7 74.6 12.4 0.0 11.7 0.4 11.4 0.0
Mid-West Companies .................. 17.1 71.5 7.7 79.1 6.2 0.0 12.6 0.4 12.3 0.0
New England Companies ............... 28.5 65.2 0.1 70.6 12.7 0.8 14.1 0.7 13.4 0.0
Other Comparative Companies ......... 49.0 46.8 2.8 51.9 1.2 0.0 7.5 0.0 7.5 0.0
Comparable Group
- ----------------
Florida Companies
- -----------------
CMSV Commty. Svgs, MHC of FL (48.5) .. 30.1 64.4 1.6 77.1 10.2 0.0 10.8 0.0 10.8 0.0
FFFL Fidelity Bcsh MHC of FL (47.7) .. 5.4 68.1 22.7 69.8 19.5 0.0 6.7 0.2 6.5 0.0
Mid-Atlantic Companies
- ----------------------
ALLB Alliance Bank MHC of PA (19.9) .. 35.9 56.3 4.9 77.2 11.4 0.0 10.7 0.0 10.7 0.0
SKBO First Carnegie MHC of PA(45.0)(1) 13.1 43.2 40.3 53.8 27.6 0.0 17.2 0.0 17.2 0.0
HARS Harris Fin. MHC of PA (24.3) .... 56.3 40.2 0.1 50.4 39.9 0.0 8.1 0.8 7.3 0.0
LFED Leeds Fed Bksr MHC of MD (36.3 .. 29.3 62.8 5.4 81.2 0.2 0.0 16.5 0.0 16.5 0.0
NBCP Niagara Bancorp of NY MHC(45.4(1) 26.8 53.6 14.5 85.3 1.3 0.0 11.1 0.0 11.1 0.0
NWSB Northwest Bcrp MHC of PA (30.7 .. 21.6 73.6 1.9 82.4 7.6 0.0 8.9 0.9 7.9 0.0
PBHC Pathfinder BC MHC of NY (46.1) .. 17.0 64.5 11.2 78.8 8.5 0.0 11.8 1.8 10.0 0.0
PHSB Ppls Home SB, MHC of PA (45.0) .. 19.6 44.2 33.1 78.1 8.3 0.0 12.8 0.0 12.8 0.0
PLSK Pulaski SB, MHC of NJ (46.0) .... 16.8 52.8 27.5 84.8 2.9 0.0 11.5 0.0 11.5 0.0
SBFL SB Fngr Lakes MHC of NY (33.1) .. 29.8 48.3 18.4 74.5 15.9 0.0 8.7 0.0 8.7 0.0
Mid-West Companies
- ------------------
FFSX First FSB MHC Sxld of IA(46.1) .. 15.0 72.1 7.2 69.3 18.8 0.0 7.2 1.5 5.7 0.0
JXSB Jcksnville SB,MHC of IL (45.6) .. 12.2 75.8 7.8 87.7 0.1 0.0 10.4 0.0 10.4 0.0
WAYN Wayne Svgs Bks MHC of OH (47.8(1) 15.4 80.9 0.1 84.1 5.5 0.0 9.5 0.0 9.5 0.0
WCFB Wbstr Cty FSB MHC of IA (45.2)(1) 25.6 57.1 15.7 75.2 0.2 0.0 23.5 0.0 23.5 0.0
New England Companies
- ---------------------
BRKL Brookline Bncp MHC of
MA(47.0)(1)(3) ...................... 29.4 69.0 0.2 68.8 9.9 0.0 18.9 0.0 18.9 0.0
PBCT Peoples Bank, MHC of CT (40.1) .. 27.6 61.3 0.0 72.4 15.5 1.6 9.2 1.3 7.9 0.0
South-East Companies
- --------------------
GBNK Gaston Fed Bncp MHC of NC(47.0).. 49.0 46.8 2.8 51.9 1.2 0.0 7.5 0.0 7.5 0.0
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Balance Sheet Annual Growth Rates Regulatory Capital
---------------------------------------------------------------- ----------------------
Cash and Loans Borrows. Net Tng Net Reg.
Assets Invs. & MBS Deposits & Subdebt Worth Worth Tangible Core Cap.
------ ----- ----- -------- --------- ----- ----- -------- ---- ----
Summit Bank
- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1998 ...................... 33.47 68.96 18.80 21.76 NM 18.32 18.32 7.78 7.78 14.39
SAIF-Insured Thrifts .................. 14.74 9.66 13.45 9.01 18.05 4.87 4.76 11.44 11.67 23.29
All Public Companies .................. 14.98 10.63 13.74 8.89 17.80 5.64 5.38 11.35 11.40 22.65
Comparable Group Average .............. 14.52 10.31 10.29 7.65 16.02 10.94 7.18 11.41 12.49 24.19
Florida Companies ................... 26.98 -0.79 33.52 16.44 48.71 7.77 6.58 9.10 9.10 17.98
Mid-Atlantic Companies .............. 9.61 3.77 10.26 6.31 26.63 10.39 7.98 11.47 11.03 25.73
Mid-West Companies .................. 7.60 28.18 2.94 6.69 -11.84 5.61 0.10 14.91 13.47 27.22
New England Companies ............... 12.88 18.37 6.34 10.13 10.94 25.10 15.65 8.50 21.65 12.10
Other Comparative Companies ......... 69.64 NM 1.40 2.38 9.38 14.14 14.14 0.00 0.00 0.00
Comparable Group
- ----------------
Florida Companies
- -----------------
CMSV Commty. Svgs, MHC of FL (48.5) .. 11.48 -7.17 21.96 9.01 48.71 7.26 7.26 9.50 9.50 18.26
FFFL Fidelity Bcsh MHC of FL (47.7) .. 42.48 5.59 45.08 23.87 NM 8.28 5.89 8.70 8.70 17.70
Mid-Atlantic Companies
- ----------------------
ALLB Alliance Bank MHC of PA (19.9) .. 14.27 12.96 16.78 11.28 49.32 6.71 6.71 NM 10.77 26.24
SKBO First Carnegie MHC of PA(45.0)(1) 2.25 -16.46 7.72 -4.82 -7.46 NM NM 17.19 17.19 57.80
HARS Harris Fin. MHC of PA (24.3) .... 16.31 32.21 0.36 -3.09 51.01 19.48 24.32 6.90 6.90 13.10
LFED Leeds Fed Bksr MHC of MD (36.3 .. 6.07 7.48 4.09 5.53 -14.29 8.08 8.08 16.00 16.00 32.54
NBCP Niagara Bancorp of NY MHC(45.4(1) 7.84 10.26 2.78 9.25 -53.34 12.80 12.80 10.90 10.90 21.06
NWSB Northwest Bcrp MHC of PA (30.7 .. 20.63 32.78 17.22 22.32 18.34 9.87 4.54 NM 7.78 15.83
PBHC Pathfinder BC MHC of NY (46.1) .. 3.05 -25.03 11.89 -2.47 89.79 7.49 -8.93 8.17 8.18 14.03
PHSB Ppls Home SB, MHC of PA (45.0) .. 8.77 3.30 11.72 -1.59 83.45 NM NM 12.50 12.50 28.60
PLSK Pulaski SB, MHC of NJ (46.0) .... -0.90 -33.69 10.48 8.88 NM NM NM 11.54 11.54 27.45
SBFL SB Fngr Lakes MHC of NY (33.1) .. 17.87 13.88 19.62 17.81 22.84 8.31 8.31 8.57 8.57 20.64
Mid-West Companies
- ------------------
FFSX First FSB MHC Sxld of IA(46.1) .. 23.42 30.34 18.60 19.91 20.02 9.37 -12.65 5.80 5.80 12.09
JXSB Jcksnville SB,MHC of IL (45.6) .. 3.55 39.88 0.11 3.46 -30.42 4.34 4.34 NM 10.60 15.40
WAYN Wayne Svgs Bks MHC of OH (47.8(1) 2.03 19.36 -1.50 2.58 -12.82 6.05 6.05 NM NM NM
WCFB Wbstr Cty FSB MHC of IA (45.2)(1) 1.40 23.11 -5.43 0.81 -24.12 2.67 2.67 24.02 24.02 54.17
New England Companies
- ---------------------
BRKL Brookline Bncp MHC of
MA(47.0)(1)(3) ...................... 4.38 13.84 0.84 -2.11 9.15 17.00 17.00 NM 34.80 NM
PBCT Peoples Bank, MHC of CT (40.1) .. 21.38 22.90 11.85 22.36 12.72 33.20 14.29 8.50 8.50 12.10
South-East Companies
- --------------------
GBNK Gaston Fed Bncp MHC of NC(47.0 .. 69.64 NM 1.40 2.38 9.38 14.14 14.14 NM NM NM
</TABLE>
- ----------------
(1) Financial information is for the quarter ending December 31, 1997.
(3) Growth rates have been annualized from available financial information.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.8
greater degree by the Peer Group, as the Bank and the Peer Group posted
borrowings-to-assets ratios of 9.5 percent and 10.8 percent, respectively.
Subordinated debt represented a nominal balance on the Peer Group's balance
sheet, as the result of one Peer Group company holding subordinated debt equal
to 1.6 percent of assets. Total interest-bearing liabilities maintained by the
Bank and the Peer Group, as a percent of assets, equaled 91.9 and 84.7 percent,
respectively, with the Peer Group's lower ratio being supported by maintenance
of a higher capital position.
A key measure of balance sheet strength for a thrift institution is its
IEA/IBL ratio. Presently, the Peer Group's IEA/IBL ratio is slightly higher than
the Bank's ratio, based on respective ratios of 113.3 percent and 106.3 percent.
The additional capital realized from stock proceeds should serve to provide
Summit with an IEA/IBL ratio that is comparable to or slightly higher than
currently maintained by the Peer Group, as the interest-free capital realized in
Summit's stock offering is expected to be deployed primarily into
interest-earning assets.
The growth rate section of Table 3.2 shows annual growth rates for key
balance sheet items. Summit's growth rates are based on annualized growth for
the nine months ended March 31, 1998, while the Peer Group's growth rates are
based on annual growth for the 12 months ended March 31, 1998, or the most
recent period available. Asset growth rates of positive 33.5 percent and
positive 14.5 percent were posted by the Bank and the Peer Group, respectively.
Growth in investments and mortgage-backed securities accounted for most of the
Bank's asset growth, which was supplemented by loan growth. Growth in loans and
mortgage-backed securities accounted for most of the Peer Group's asset growth,
while a comparable growth rate was recorded in the Peer Group's lower balance of
cash and investments. The Bank's asset growth rates would tend to support
greater earnings growth relative to the Peer Group's measures; however, given
Summit's current level of capital, Summit's capacity to leverage further is
somewhat limited without the infusion of capital to be realized from the
minority stock offering.
Deposit growth of 21.8 percent funded most of Summit's asset growth, which
exceeded the Peer Group's deposit growth rate of 7.7 percent. Borrowings were
added by the Bank as well, with the not meaningful growth rate indicated for
Summit's borrowings growth rate resulting from an annualized growth rate that
exceeded 100 percent. Growth in borrowings was also exhibited by the Peer Group
companies, with the Peer Group posting a borrowings growth rate of 16.0 percent.
In fact, the Peer Group's borrowings growth rate was somewhat
<PAGE>
RP Financial, LC.
Page 3.9
understated, as the "NM" borrowings growth rates shown for two of the Peer Group
companies included companies with borrowings growth rates in excess of 100
percent. For the period shown in Table 3.2, Peer Group companies with borrowing
growth rates in excess of 100 percent accounted for both of the "NM" borrowing
growth rates shown in Table 3.2.
Capital growth rates posted by the Bank and the Peer Group equaled positive
18.3 percent and positive 10.9 percent, respectively, reflecting Summit's higher
return on average assets combined with its lower capital position. Dividend
payments further contributed to the Peer Group's lower capital growth rate.
Following the increase in capital realized from stock offering proceeds, the
Bank's capital growth rate will be depressed by its higher pro forma capital
position, as well as by possible dividend payments and stock repurchases.
Income and Expense Components
Summit and the Peer Group reported net income to average assets ratios of
1.06 percent and 0.81 percent, respectively (see Table 3.3), based on earnings
for the twelve months ended March 31, 1998, unless otherwise indicated for the
Peer Group companies. The higher return posted by the Bank was supported by
gains realized from the sale of investment securities. In terms of core earnings
measures, the Bank maintained a higher net interest margin and a higher level of
operating expenses compared to the Peer Group. Non-interest operating income and
loan loss provisions were similar factors in the Bank's and the Peer Group's
earnings.
The Bank's stronger net interest margin resulted primarily from maintaining
a lower interest expense ratio and, to a lesser extent, a higher interest income
ratio. Summit's higher interest income ratio was supported by maintaining a
higher level of interest-earning assets as a percent of total assets (97.7
percent versus 96.0 percent for the Peer Group), as well as a higher yield
earned on interest-earning assets (7.86 percent versus 7.47 percent for the Peer
Group). Summit's higher yield earned on interest-earning assets was supported by
its greater degree of lending diversification into higher yielding and higher
risk types of lending. The lower interest expense ratio maintained by the Bank
was supported by its lower cost of funds (4.10 percent versus 4.65 percent for
the Peer Group), reflecting the Bank's maintenance of a relatively high
concentration of deposits in lower costing transaction and savings accounts.
Partially offsetting the Bank's cost of funds advantage was the lower level of
interest-bearing liabilities maintained by the Peer Group (84.7 percent versus
91.9 percent for the Bank).
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1998
<TABLE>
<CAPTION>
Net Interest Income Other Income
--------------------------- --------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- --- ------ ------- ---- ----- ------ ------
Summit Bank
- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1998 ...................... 1.06 7.09 3.30 3.78 0.06 3.72 0.00 0.01 0.42 0.43
SAIF-Insured Thrifts .................. 0.92 7.43 4.15 3.28 0.13 3.15 0.10 0.01 0.30 0.41
All Public Companies .................. 0.94 7.41 4.09 3.31 0.13 3.18 0.10 0.01 0.31 0.42
Comparable Group Average .............. 0.81 6.80 3.79 3.00 0.11 2.89 0.14 0.00 0.26 0.39
Florida Companies ................... 0.70 7.19 4.10 3.08 0.03 3.06 0.03 0.01 0.42 0.46
Mid-Atlantic Companies .............. 0.76 6.74 3.81 2.92 0.09 2.83 0.05 -0.01 0.19 0.23
Mid-West Companies .................. 0.86 7.35 4.12 3.23 0.08 3.14 0.05 0.00 0.30 0.35
New England Companies ............... 1.06 5.16 2.60 2.57 0.26 2.31 0.88 -0.02 0.42 1.28
Other Comparable Companies .......... 0.79 7.66 4.10 3.56 0.24 3.32 0.12 0.00 0.18 0.00
Comparable Group
- ----------------
Florida Companies
- -----------------
CMSV Commty. Svgs, MHC of FL (48.5) .. 0.73 7.23 3.95 3.28 0.05 3.23 0.04 0.00 0.48 0.52
FFFL Fidelity Bcsh MHC of FL (47.7) .. 0.66 7.15 4.26 2.89 0.00 2.89 0.03 0.01 0.36 0.41
Mid-Atlantic Companies
- ----------------------
ALLB Alliance Bank MHC of PA (19.9) .. 0.80 7.24 3.83 3.40 0.06 3.34 0.00 0.00 0.23 0.23
SKBO First Carnegie MHC of PA(45.0)(1) 0.63 6.87 4.20 2.67 0.05 2.62 0.01 0.00 -0.02 0.00
HARS Harris Fin. MHC of PA (24.3) .... 0.89 7.10 4.71 2.39 0.06 2.33 0.13 0.04 0.18 0.36
LFED Leeds Fed Bksr MHC of MD (36.3 .. 1.19 7.00 4.15 2.86 0.01 2.85 0.00 0.00 0.11 0.11
NBCP Niagara Bancorp of NY MHC(45.4(1) 0.36 2.63 1.43 1.20 0.05 1.15 0.07 0.00 0.11 0.18
NWSB Northwest Bcrp MHC of PA (30.7 .. 0.95 7.74 4.17 3.57 0.17 3.40 0.13 0.00 0.17 0.30
PBHC Pathfinder BC MHC of NY (46.1) .. 0.91 7.36 3.62 3.75 0.14 3.61 0.03 0.00 0.46 0.49
PHSB Ppls Home SB, MHC of PA (45.0) .. 0.81 7.13 3.71 3.42 0.24 3.18 0.00 0.00 0.37 0.36
PLSK Pulaski SB, MHC of NJ (46.0) .... 0.63 7.09 4.08 3.00 0.07 2.93 0.07 -0.01 0.05 0.11
SBFL SB Fngr Lakes MHC of NY (33.1) .. 0.40 7.19 4.21 2.98 0.05 2.92 0.03 -0.09 0.21 0.15
Mid-West Companies
- ------------------
FFSX First FSB MHC Sxld of IA(46.1) .. 0.68 7.04 4.24 2.80 0.07 2.73 0.03 0.00 0.50 0.53
JXSB Jcksnville SB,MHC of IL (45.6) .. 0.58 7.64 4.32 3.32 0.20 3.12 0.19 0.00 0.26 0.44
WAYN Wayne Svgs Bks MHC of OH (47.8(1) 0.75 7.55 4.34 3.21 0.02 3.19 0.00 0.00 0.23 0.23
WCFB Wbstr Cty FSB MHC of IA (45.2)(1) 1.45 7.15 3.57 3.58 0.04 3.54 0.00 0.00 0.22 0.21
New England Companies
- ---------------------
BRKL Brookline Bncp MHC of MA(47.0)(1) 0.95 3.74 1.78 1.96 0.00 1.96 0.01 0.00 0.07 0.08
PBCT Peoples Bank, MHC of CT (40.1) .. 1.18 6.58 3.41 3.18 0.52 2.65 1.75 -0.04 0.76 2.48
South-East Companies
- --------------------
GBNK Gaston Fed Bncp MHC of NC(47.0 .. 0.79 7.66 4.10 3.56 0.24 3.32 0.12 0.00 0.18 0.30
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
----------------- -------------- ---------------------------
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- ----- ----- --------- -------- ------ -------- --------
Summit Bank
- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
March 31, 1998 ...................... 3.24 0.00 0.73 0.00 7.86 4.10 3.76 2,624 34.78
SAIF-Insured Thrifts .................. 2.18 0.02 0.07 0.00 7.60 4.82 2.78 4,380 37.05
All Public Companies .................. 2.20 0.03 0.07 0.00 7.59 4.74 2.85 4,348 37.26
Comparable Group Average .............. 2.16 0.02 0.12 0.00 7.47 4.65 2.82 4,304 35.98
Florida Companies ................... 2.49 0.02 0.11 0.00 7.46 4.65 2.81 3,598 38.50
Mid-Atlantic Companies .............. 2.00 0.03 0.06 0.00 7.47 4.68 2.79 4,700 35.33
Mid-West Companies .................. 2.23 0.00 0.10 0.00 7.59 4.80 2.79 3,106 36.71
New England Companies ............... 2.34 0.02 0.42 0.00 7.57 4.25 3.33 5,195 35.18
Other Comparable Companies .......... 2.52 0.00 0.14 0.00 6.83 4.62 2.21 4,775 36.19
Comparable Group
- ----------------
Florida Companies
- -----------------
CMSV Commty. Svgs, MHC of FL (48.5) .. 2.71 0.00 0.09 0.00 7.52 4.56 2.96 2,688 35.02
FFFL Fidelity Bcsh MHC of FL (47.7) .. 2.27 0.03 0.14 0.00 7.41 4.74 2.67 4,507 41.97
Mid-Atlantic Companies
- ----------------------
ALLB Alliance Bank MHC of PA (19.9) .. 2.38 0.00 0.00 0.00 7.49 4.34 3.15 3,788 33.40
SKBO First Carnegie MHC of PA(45.0)(1) 1.64 0.00 -0.12 0.00 7.11 5.07 2.03 7,561 53.40
HARS Harris Fin. MHC of PA (24.3) .... 1.73 0.11 0.25 0.00 7.37 5.19 2.18 4,680 37.25
LFED Leeds Fed Bksr MHC of MD (36.3 .. 1.08 0.00 0.00 0.00 7.14 5.08 2.06 11,074 36.81
NBCP Niagara Bancorp of NY MHC(45.4(1) 0.81 0.00 0.03 0.00 7.54 4.52 3.02 3,628 35.75
NWSB Northwest Bcrp MHC of PA (30.7 .. 2.13 0.07 0.00 0.00 7.97 4.67 3.30 2,855 36.96
PBHC Pathfinder BC MHC of NY (46.1) .. 2.98 0.12 0.26 0.00 7.92 4.14 3.79 2,616 30.40
PHSB Ppls Home SB, MHC of PA (45.0) .. 2.75 0.00 0.12 0.00 7.37 4.27 3.10 2,979 11.58
PLSK Pulaski SB, MHC of NJ (46.0) .... 2.03 0.00 0.00 0.00 7.30 4.79 2.52 4,240 37.98
SBFL SB Fngr Lakes MHC of NY (33.1) .. 2.50 0.00 0.09 0.00 7.45 4.69 2.76 3,584 39.77
Mid-West Companies
- ------------------
FFSX First FSB MHC Sxld of IA(46.1) .. 2.19 0.01 -0.01 0.00 7.33 4.73 2.60 3,245 35.76
JXSB Jcksnville SB,MHC of IL (45.6) .. 2.89 0.00 0.31 0.00 7.98 4.93 3.05 2,044 40.22
WAYN Wayne Svgs Bks MHC of OH (47.8(1) 2.37 0.00 0.08 0.00 7.80 4.83 2.97 2,603 34.02
WCFB Wbstr Cty FSB MHC of IA (45.2)(1) 1.46 0.00 0.00 0.00 7.25 4.73 2.53 4,530 36.85
New England Companies
- ---------------------
BRKL Brookline Bncp MHC of MA(47.0)(1) 0.60 0.00 0.01 0.00 8.03 4.69 3.34 7,621 34.79
PBCT Peoples Bank, MHC of CT (40.1) .. 4.08 0.04 0.83 0.00 7.12 3.80 3.32 2,768 35.57
South-East Companies
- --------------------
GBNK Gaston Fed Bncp MHC of NC(47.0 .. 2.52 0.00 0.14 0.00 6.83 4.62 2.21 4,775 36.19
</TABLE>
- --------------
(1) Financial information is for the quarter ending December 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.11
Following the infusion of stock proceeds, the Bank's comparative advantage with
respect to maintaining a lower interest expense ratio should increase due to the
decline in the level of interest-bearing liabilities being utilized to fund
assets. Overall, Summit and the Peer Group reported net interest income to
average assets ratios of 3.78 percent and 3.00 percent, respectively.
In another key area of core earnings strength, the Bank maintained a higher
level of operating expenses than the Peer Group. For the period covered in Table
3.3, the Bank and the Peer Group recorded operating expense to average assets
ratios of 3.24 percent and 2.18 percent, respectively. Summit's higher operating
expense ratio can in part be explained by its maintenance of a higher number of
employees for its asset size, as compared to the Peer Group companies on
average. Assets per full time equivalent employee equaled $2.6 million for the
Bank, versus a comparative measure of $4.3 million for the Peer Group. Factors
contributing to the Bank's relatively high staffing needs include maintaining a
fairly diversified operating strategy and maintaining a relatively higher number
of branches for an institution with $131 million in assets. On a post-offering
basis, the Bank's operating expenses can be expected to increase with the
addition of public company reporting expenses and stock benefit plans, with such
expenses already impacting the Peer Group's operating expenses. At the same
time, given the Bank's recent history of strong growth, the additional capital
realized from the minority stock offering will support further growth and
facilitate leveraging of the Bank's existing operating expenses.
When viewed together, net interest income and operating expenses provide
considerable insight into a thrift's earnings strength, since those sources of
income and expenses are typically the most prominent components of earnings and
are generally more predictable than losses and gains realized from the sale of
assets or other non-recurring activities. In this regard, as measured by their
expense coverage ratios (net interest income divided by operating expenses), the
Bank's earnings strength was less than the Peer Group's. Expense coverage ratios
posted by Summit and the Peer Group equaled 1.17x and 1.38x, respectively. An
expense coverage ratio of greater than 1.0x indicates that an institution is
able to sustain pre-tax profitability without having to rely on non-interest
sources of income.
Sources of non-interest operating income were a similar contributor to the
Bank's and the Peer Group's earnings, with such income amounting to 0.43 percent
and 0.39 percent of Summit's and the Peer Group's average assets, respectively.
Taking non-interest operating income into account in comparing the Bank's and
the Peer Group's earnings, Summit's
<PAGE>
RP Financial, LC.
Page 3.12
efficiency ratio (operating expenses, net of amortization of intangibles, as a
percent of the sum of non-interest operating income and net interest income) of
77.0 percent was less favorable than the Peer Group's efficiency ratio of 63.7
percent.
Loss provisions were a fairly minor factor in both the Bank's and the Peer
Group's earnings, amounting to 0.06 percent and 0.11 percent of average assets
for Summit and the Peer Group, respectively. Overall, the level of loan loss
provisions established by the Bank and the Peer Group were indicative of low
credit risk operating strategies, which, in turn, have provided generally
favorable credit quality measures for the Bank and the Peer Group.
Net gains realized from the sale of investments and loans were a
significantly larger factor in the Bank's earnings, with such gains amounting to
0.73 percent and 0.12 percent of average assets for Summit and the Peer Group,
respectively. The gains recorded by the Bank were substantially realized from
the sale of equity securities, reflecting the generally favorable market
environment for stocks that has prevailed in recent years. While such gains have
been a notable contributor to Summit's earnings in recent years, they are
subject to notable volatility due to fluctuations in the market and, thus, are
not viewed as being a recurring source of income for the Bank. Accordingly, the
net gains reflected in Bank's and the Peer Group's earnings will be discounted
in evaluating the relative strengths and weaknesses of their respective
earnings. Extraordinary items were not a factor in either the Bank's or the Peer
Group's earnings.
The Bank's and the Peer Group's pre-tax earnings were similarly impacted by
taxes, with Summit and the Peer Group posting effective tax rates of 34.8
percent and 36.0 percent, respectively.
Loan Composition
Table 3.4 presents data related to the loan composition of Summit and the
Peer Group. In comparison to the Bank, the Peer Group's loan portfolio
composition reflected a higher concentration of 1-4 family permanent mortgage
loans and mortgage-backed securities (79.0 percent versus 66.2 percent for the
Bank). The Peer Group's higher ratio was the result of maintaining higher
concentrations of both 1-4 family permanent mortgage loans and mortgage-backed
securities. Given the Bank's general philosophy of selling loans on a servicing
released basis, loans serviced for others represented a more significant
off-balance sheet item for the Peer Group. While the Peer Group companies were
viewed as being primarily portfolio
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of March 31, 1998
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
----------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA/ Serviced Servicing
Institution MBS Family & Land Comm RE Business Consumer Assets For Others Assets
- ----------- --- ------ ------ ------- -------- -------- ------ ---------- ------
(%) (%) (%) (%) (%) (%) (%) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Summit Bank ................................ 9.11 57.05 4.82 15.15 4.40 9.47 53.03 1,268 0
SAIF-Insured Thrifts ....................... 14.81 62.86 5.47 11.25 6.04 1.70 52.93 387,694 3,596
All Public Companies ....................... 15.05 61.22 4.94 12.94 5.73 1.97 53.47 506,092 4,969
Comparable Group Average ................... 12.06 66.93 3.31 7.83 8.26 2.72 50.23 195,411 1,274
Comparable Group
- ----------------
ALLB Alliance Bank MHC of PA (19.9) ....... 3.71 78.68 1.70 11.00 3.69 0.00 43.21 719 0
BRKL Brookline Bncp MHC of MA(47.0)(1) .... NA NA NA NA NA NA NA 1,298 0
CMSV Commty. Svgs, MHC of FL (48.5) ....... 4.23 74.30 13.30 10.73 1.66 1.53 53.96 17,219 0
FFFL Fidelity Bcsh MHC of FL (47.7) ....... 17.25 66.22 8.91 5.23 4.66 2.20 35.34 64,209 394
SKBO First Carnegie MHC of PA(45.0)(1) .... NA NA NA NA NA NA 30.38 52 0
FFSX First FSB MHC Sxld of IA(46.1) ....... 12.75 70.45 1.76 5.13 9.74 0.79 50.99 23,551 0
GBNK Gaston Fed Bncp MHC of NC(47.0 ....... NA NA NA NA NA NA NA 0 0
HARS Harris Fin. MHC of PA (24.3) ......... 14.86 68.71 2.01 5.73 8.53 0.04 55.70 1,002,238 11,373
JXSB Jcksnville SB,MHC of IL (45.6) ....... 10.91 57.54 0.98 9.10 16.55 4.96 69.77 94,000 433
LFED Leeds Fed Bksr MHC of MD (36.3 ....... 13.79 83.08 1.20 0.88 2.09 0.00 49.26 0 0
NBCP Niagara Bancorp of NY MHC(45.4(1) .... NA NA NA NA NA NA 55.59 129,000 0
NWSB Northwest Bcrp MHC of PA (30.7 ....... 4.40 73.72 3.56 2.88 12.06 4.62 50.82 93,176 0
PBHC Pathfinder BC MHC of NY (46.1) ....... 15.44 63.13 1.51 11.73 2.76 5.74 60.51 0 0
PBCT Peoples Bank, MHC of CT (40.1) ....... 0.01 46.87 4.02 13.79 22.51 12.16 70.76 2,238,400 12,000
PHSB Ppls Home SB, MHC of PA (45.0) ....... NA NA NA NA NA NA 45.93 0 0
PLSK Pulaski SB, MHC of NJ (46.0) ......... NA NA NA NA NA NA 43.74 0 0
SBFL SB Fngr Lakes MHC of NY (33.1) ....... 32.74 43.28 0.89 8.61 12.10 2.70 39.74 9,900 0
WAYN Wayne Svgs Bks MHC of OH (47.8(1) .... 0.19 86.35 3.11 6.60 5.46 0.59 53.61 39,047 0
WCFB Wbstr Cty FSB MHC of IA (45.2)(1) .... 26.50 57.70 0.07 10.43 5.61 0.00 44.52 0 0
</TABLE>
- --------------
(1) Financial information is for the quarter ending December 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.14
lenders, a couple of the Peer Group companies maintained significant balances of
loans serviced for others (Peoples Bank of CT and Harris SB of PA). The Peer
Group's average balance of loans serviced for others equaled $195.4 million, or
15.9 percent of average assets, which represents a recurring source of
non-interest operating income that is not a significant part of the Bank's
current earnings stream. Summit's loans serviced for others totaled $1.3
million, or 1.0 percent of total assets. With the exception of Peoples Bank and
Harris SB, loan servicing intangibles were not a significant balance sheet item
for the Peer Group companies.
As indicated by the higher percentages of 1-4 family loans and
mortgage-backed securities maintained by the Peer Group, Summit exhibited a
greater degree of lending diversification into higher risk types of loans.
Summit's lending diversification has consisted primarily of commercial real
estate/multi-family loans (15.2 percent of loans and MBS), followed by consumer
loans (9.5 percent of loans and MBS. Commercial business and commercial real
estate/multi-family loans represented the primary areas of lending
diversification for the Peer Group, averaging 8.3 percent and 7.8 percent of the
Peer Group's loan and MBS portfolio, respectively. Construction and land loans
were also a more significant area of lending diversification for the Bank, with
such loans equaling 4.8 percent and 3.3 percent of Summit's and the Peer Group's
loan and MBS portfolios, respectively. The balance of the Bank's loan portfolio
consisted of commercial business loans (4.4 percent of loans and MBS), while
consumers loans represented the least notable area of lending diversification
for the Peer Group (2.7 percent of loans and MBS). Notwithstanding the Bank's
greater diversification into higher risk types of lending, Summit's risk
weighted assets-to-assets ratio of 53.03 percent was only slightly higher than
the Peer Group's ratio of 50.23 percent. The comparability of the Bank's and the
Peer Group's risk weighted assets-to-assets ratios indicates that the higher
risk associated with Summit's more diversified loan portfolio was offset by its
overall-interest earning asset composition, which reflected a lower
concentration of loans and a higher concentration of investments relative to the
Peer Group's interest-earning asset composition. Overall, the Bank's and the
Peer Group's risk weighted assets-to-assets ratios were both slightly lower than
the comparative ratio of 53.5 percent for all publicly-traded thrifts.
<PAGE>
RP Financial, LC.
Page 3.15
Interest Rate Risk
Table 3.5 reflects various key ratios highlighting the relative interest
rate risk exposure of the Bank versus the Peer Group companies. In terms of
balance sheet composition, Summit's interest rate risk characteristics were
considered to be slightly less favorable than the Peer Group's. In particular,
Summit's lower capital position and lower IEA/IBL ratio indicate a greater
dependence on the yield-cost spread to sustain the net interest margin. However,
Summit's lower level of non-interest earning assets was a positive consideration
in terms of capacity to generate interest income. On a pro forma basis, the
infusion of stock proceeds should serve to increase the Bank's equity-to-assets
ratio and IEA/IBL ratio to levels that are comparable to the comparative Peer
Group ratios.
To analyze interest rate risk associated with the net interest margin, we
reviewed quarterly changes in net interest income as a percent of average assets
for Summit and the Peer Group. In general, the relative fluctuations in both the
Bank's and the Peer Group's net interest income to average assets ratios were
considered to be fairly limited and, thus, based on the interest rate
environment that prevailed during the period covered in Table 3.5, neither
Summit or the Peer Group were viewed as having significant interest rate risk
exposure in their respective net interest margins. The stability of the Bank's
net interest margin should be enhanced by the infusion of stock proceeds, as
interest rate sensitive liabilities will be funding a lower portion of Summit's
assets.
Credit Risk
Overall, the Peer Group's credit risk exposure appeared to be somewhat
comparable to the Bank's, with both the Bank's and the Peer Group's credit
quality measures being representative of fairly limited credit risk exposure. As
shown in Table 3.6, the Peer Group's ratio of non-performing assets-to-assets
(REO, non-accruing loans and accruing loans more than 90 days past due)
approximated the Bank's ratio (0.59 percent versus 0.51 percent for the Bank).
However, the Peer Group's non-performing loans-to-loans ratio was higher than
the Bank's ratio (0.68 percent versus 0.48 percent for the Bank), since that
measure does not include accruing loans that are more than 90 days past due.
Accruing loans that are more than 90 days past due accounted for 48.5 percent of
the Bank's non-accruing loans and accruing loans that are more than 90 days past
due, as of March 31, 1998. Loss reserve ratios were generally stronger for the
Peer Group, as the Peer Group maintained a higher level of loss
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.6
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of March 31, 1998 or Most Recent Date Available
<TABLE>
<CAPTION>
Balance Sheet Measures
---------------------------
Quarterly Change in Net Interest Income
Non-Earn. ----------------------------------------------------------
Equity/ IEA/ Assets/
Institution Assets IBL Assets 03/31/98 12/31/97 09/30/97 06/30/97 03/31/97 12/31/96
- ----------- ------ ---- ------ -------- -------- -------- -------- -------- --------
(%) (%) (%) (change in net interest income is annualized in basis points)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Summit Bank .............................. 7.5 106.3 2.3 -7 -13 -4 12 -11 0
SAIF-Insured Thrifts ..................... 13.2 115.4 3.3 0 -3 -4 2 0 5
All Public Companies ..................... 12.8 114.4 3.4 -0 -3 -4 1 0 5
Comparable Group Average ................. 11.3 115.3 3.9 -6 -7 0 -3 6 2
Market Interest Rates
- ---------------------
1 Year Treasury Bill ..................... -- -- -- -9 4 -22 -34 51 -20
30 Year Treasury Bond .................... -- -- -- 1 -48 -38 -32 46 -28
Comparable Group
- ----------------
ALLB Alliance Bank MHC of PA (19.9) ..... 10.7 109.6 2.9 -24 11 -2 11 11 4
BRKL Brookline Bncp MHC of MA(47.0)(1) .. 18.9 125.3 1.4 NA -1 4 -41 NA NA
CMSV Commty. Svgs, MHC of FL (48.5) ..... 10.8 110.2 3.9 5 -11 0 -1 -5 -24
FFFL Fidelity Bcsh MHC of FL (47.7) ..... 6.5 107.8 3.8 -13 -25 -6 -13 -3 -5
SKBO First Carnegie MHC of PA(45.0)(1) .. 17.2 118.7 3.4 NA 2 -4 14 30 NA
FFSX First FSB MHC Sxld of IA(46.1) ..... 5.7 107.0 5.7 -24 1 -9 1 12 -0
GBNK Gaston Fed Bncp MHC of NC(47.0 ..... 7.5 185.5 1.5 -72 -8 6 12 NA NA
HARS Harris Fin. MHC of PA (24.3) ....... 7.3 106.9 3.4 40 -28 -8 1 -12 28
JXSB Jcksnville SB,MHC of IL (45.6) ..... 10.4 109.1 4.1 17 -22 11 -30 7 4
LFED Leeds Fed Bksr MHC of MD (36.3 ..... 16.5 119.9 2.4 -5 -1 -11 4 11 6
NBCP Niagara Bancorp of NY MHC(45.4(1) .. 11.1 109.7 5.1 NA -2 -8 -3 8 NA
NWSB Northwest Bcrp MHC of PA (30.7 ..... 7.9 107.9 2.9 8 -13 -19 7 7 -3
PBHC Pathfinder BC MHC of NY (46.1) ..... 10.0 106.1 7.3 -14 -12 5 4 20 NA
PBCT Peoples Bank, MHC of CT (40.1) ..... 7.9 99.3 11.1 18 -34 23 -30 11 31
PHSB Ppls Home SB, MHC of PA (45.0) ..... 12.8 112.1 3.1 -17 4 28 0 NA NA
PLSK Pulaski SB, MHC of NJ (46.0) ....... 11.5 110.6 2.9 -1 -2 9 19 -12 -6
SBFL SB Fngr Lakes MHC of NY (33.1) ..... 8.7 106.8 3.5 -7 2 -5 -3 -13 5
WAYN Wayne Svgs Bks MHC of OH (47.8(1) .. 9.5 107.6 3.6 NA -5 4 6 -5 -4
WCFB Wbstr Cty FSB MHC of IA (45.2)(1) .. 23.5 130.5 1.6 NA 4 -9 -9 31 -14
</TABLE>
- ---------------
(1) Financial information is for the quarter ending December 31, 1997.
NA=Change is greater than 100 basis points during the quarter.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.5
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of March 31, 1998 or Most Recent Date Available
<TABLE>
<CAPTION>
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
- ----------- ------ ------ ----- ----- ------ ------ --------- -----
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Summit Bank .................................. 0.00 0.51 0.48 0.78 163.27 84.08 54 0.07
SAIF-Insured Thrifts ......................... 0.26 0.65 0.71 0.80 196.38 137.66 249 0.09
All Public Companies ......................... 0.25 0.65 0.74 0.88 195.72 144.00 251 0.09
Comparable Group Average ..................... 0.17 0.59 0.68 0.93 185.70 128.30 77 0.08
Comparable Group
- ----------------
ALLB Alliance Bank MHC of PA (19.9) ......... 0.91 1.38 0.57 1.02 176.68 41.98 22 0.06
BRKL Brookline Bncp MHC of MA(47.0)(1) ...... 0.29 0.62 0.50 2.30 455.72 245.94 0 0.00
CMSV Commty. Svgs, MHC of FL (48.5) ......... 0.12 0.26 0.22 0.55 252.30 134.87 87 0.07
FFFL Fidelity Bcsh MHC of FL (47.7) ......... 0.07 0.32 0.38 0.36 94.99 75.42 0 0.00
SKBO First Carnegie MHC of PA(45.0)(1) ...... 0.01 0.78 1.12 0.85 76.50 47.72 0 0.00
FFSX First FSB MHC Sxld of IA(46.1) ......... 0.08 0.36 0.43 0.61 143.68 122.22 58 0.07
GBNK Gaston Fed Bncp MHC of NC(47.0 ......... 0.09 0.32 0.50 0.92 181.70 134.01 0 -0.01
HARS Harris Fin. MHC of PA (24.3) ........... 0.30 0.66 0.87 0.99 112.94 60.87 396 0.17
JXSB Jcksnville SB,MHC of IL (45.6) ......... 0.19 0.86 0.86 0.61 70.52 54.02 20 0.06
LFED Leeds Fed Bksr MHC of MD (36.3 ......... 0.00 NA 0.05 0.29 560.82 NA 0 0.00
NBCP Niagara Bancorp of NY MHC(45.4(1) ...... 0.02 0.25 0.46 1.10 239.06 217.16 90 0.06
NWSB Northwest Bcrp MHC of PA (30.7 ......... 0.16 0.69 0.72 0.83 115.86 89.55 462 0.11
PBHC Pathfinder BC MHC of NY (46.1) ......... 0.46 1.33 1.33 0.70 52.21 34.08 15 0.05
PBCT Peoples Bank, MHC of CT (40.1) ......... 0.13 0.66 0.97 1.76 182.40 166.94 NM NM
PHSB Ppls Home SB, MHC of PA (45.0) ......... 0.02 0.36 0.70 1.32 188.59 164.84 162 0.64
PLSK Pulaski SB, MHC of NJ (46.0) ........... 0.04 0.73 1.31 0.93 71.31 67.79 0 0.00
SBFL SB Fngr Lakes MHC of NY (33.1) ......... 0.02 0.27 0.52 0.94 181.59 170.49 65 0.22
WAYN Wayne Svgs Bks MHC of OH (47.8(1) ...... 0.36 NA NA NA NA NA 5 0.00
WCFB Wbstr Cty FSB MHC of IA (45.2)(1) ...... 0.06 0.12 NA 0.70 NA 353.21 0 0.00
</TABLE>
- ---------------
(1) Financial information is for the quarter ending December 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.18
reserves as a percent of non-performing assets (128.3 percent versus 84.1
percent for the Bank) and as percent of loans (0.93 percent versus 0.78 percent
for the Bank). Net loan charge-offs were a comparable factor in the Bank's and
the Peer Group's earnings, equaling 0.07 percent and 0.08 percent of loans
receivable, respectively.
Summary
Based on the above analysis, RP Financial concluded that the Peer Group
forms a reasonable basis for determining the pro forma market value of Summit.
Due to the limited number of publicly-traded MHCs in today's market, there are
some significant differences between the Bank and certain Peer Group members.
Those areas where substantial differences exist, such as disparate asset sizes,
different market areas, market capitalization and other variations will be
addressed in the form of valuation adjustments to the extent necessary. For
these reasons, and because the Peer Group members all share the unique
characteristics of mutual holding company ownership, RP Financial concluded that
the Peer Group pricing (full conversion basis) will serve as a sound basis in
deriving a pro forma market value for Summit.
<PAGE>
RP Financial, LC.
Page 4.1
IV. VALUATION ANALYSIS
Introduction
This chapter presents the valuation analysis and methodology used to
determine Summit's estimated pro forma market value for purposes of pricing the
minority stock. The valuation incorporates the appraisal methodology promulgated
by the OTS and adopted in practice by the FDIC and the Division for standard
conversions and mutual holding company offerings, particularly regarding
selection of the Peer Group, fundamental analysis on both the Bank and the Peer
Group, and determination of the Bank's pro forma market value utilizing the
market value approach.
Appraisal Guidelines
The OTS written appraisal guidelines, originally released in October 1983
and updated in late-1994, specify the market value methodology for estimating
the pro forma market value of an institution. The FDIC, state banking agencies
and other Federal agencies have endorsed the OTS appraisal guidelines as the
appropriate guidelines involving mutual-to-stock conversions. As previously
noted, the appraisal guidelines for MHC offerings is somewhat different,
particularly in the Peer Group selection process. Specifically, the regulatory
agencies have indicated that the Peer Group should be based on the pro forma
fully-converted pricing characteristics of publicly-traded MHCs, rather than on
already fully-converted publicly-traded stock thrifts, given the unique
differences in stock pricing of MHCs and fully-converted stock thrifts. Pursuant
to this methodology: (1) a peer group of comparable publicly-traded institutions
is selected; (2) a financial and operational comparison of the subject company
to the peer group is conducted to discern key differences; and (3) the pro forma
market value of the subject company is determined based on the market pricing of
the peer group, subject to certain valuation adjustments based on key
differences.
RP Financial Approach to the Valuation
The valuation analysis herein complies with such regulatory approval
guidelines. Accordingly, the valuation incorporates a detailed analysis based on
the Peer Group, discussed in Chapter III, which constitutes "fundamental
analysis" techniques. The valuation incorporates a "technical analysis" of
recently completed stock offerings of comparable MHCs,
<PAGE>
RP Financial, LC.
Page 4.2
including the aftermarket trading of such offerings. In this regard, there has
been limited new MHC activity, so this analysis is rather limited. It should be
noted that these valuation analyses, based on either the Peer Group or the
recent MHC transactions, cannot possibly fully account for all the market forces
which impact trading activity and pricing characteristics of a stock on a given
day.
The pro forma market value determined herein is a preliminary value for the
Bank's to-be-issued stock. Throughout the MHC process, RP Financial will: (1)
review changes in the Bank's operations and financial condition; (2) monitor the
Bank's operations and financial condition relative to the Peer Group to identify
any fundamental changes; (3) monitor the external factors affecting value
including, but not limited to, local and national economic conditions, interest
rates, and the stock market environment, including the market for thrift stocks;
and (4) monitor pending MHC offerings, and to a lesser extent, conversion
offerings, both regionally and nationally. If material changes should occur
prior to closing the offering, RP Financial will evaluate, in conjunction with
the Bank, if updated valuation reports should be prepared reflecting such
changes and their related impact on value, if any. RP Financial will also
prepare a final valuation update at the closing of the offering to determine if
the prepared valuation analysis and resulting range of value continues to be
appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Bank and for all thrifts. Subsequent changes in
the local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or major world events), which may occur from time to time (often with
great unpredictability) may materially impact the market value of all thrift
stocks, including Summit, the market value of the stocks of public MHC
institutions, or Summit's value alone. To the extent a change in factors
impacting the Bank's value can be reasonably anticipated and/or quantified, RP
Financial has incorporated the estimated impact into its analysis.
Valuation Analysis
A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections summarize
the key differences between the Bank and the Peer Group and how those
differences affect the pro forma valuation. Emphasis is placed on the specific
strengths and weaknesses of the Bank relative to
<PAGE>
RP Financial, LC.
Page 4.3
the Peer Group in such key areas as financial condition, profitability, growth
and viability of earnings, asset growth, primary market area, dividends,
liquidity of the shares, marketing of the issue, management, and the effect of
government regulations and/or regulatory reform. We have also considered the
market for thrift stocks, in particular new issues, to assess the impact on
value of Summit coming to market at this time.
1. Financial Condition
The financial condition of an institution is an important determinant in
pro forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The similarities and differences in the
Bank's and the Peer Group's financial strength are noted as follows:
o Overall A/L Composition. Loans funded by retail deposits were the
primary components of both Summit's and the Peer Group's balance
sheets. The Peer Group's interest-earning asset compositions exhibited
a higher concentration of loans, while the Bank's loan portfolio
composition reflected a greater degree of diversification into higher
risk and higher yielding types of loans. Overall, the Peer Group's
higher concentration of loans and the Bank's greater degree of lending
diversification translated into comparable risk weighted
assets-to-asset ratios. Summit's funding composition reflected a
higher concentration of deposits and a similar concentration of
borrowings relative to the comparative Peer Group ratios. Overall, as
a percent of assets, the Bank maintained a higher level of
interest-earning assets and a higher level of interest-bearing
liabilities, which resulted in a more favorable IEA/IBL ratio for the
Peer Group. However the infusion of stock proceeds will serve to
address the Bank's lower IEA/IBL ratio. For valuation purposes, RP
Financial concluded no adjustment was warranted for the Bank's overall
asset/liability composition.
o Credit Quality. Both the Bank's and the Peer Group's credit quality
measures were indicative of fairly limited credit risk exposure. The
Peer Group and Bank maintained comparable levels of non-performing
assets as a percent of total assets, although the Peer Group's
maintained a higher level of loss reserves as percent of
non-performing assets and as a percent of loans. The Bank's greater
diversification into higher risk types of lending was offset by
maintaining a higher concentration of interest-earning assets in cash
and investment, as Summit and the Peer Group maintained similar risk
weighted assets-to-assets ratios. Overall, in light of the Bank's
generally lower reserve levels, the credit risk exposure associated
with Summit's balance sheet was viewed as being slightly greater than
the Peer Group's and, thus, RP Financial concluded that a slight
downward adjustment was warranted for the Bank's credit quality.
o Balance Sheet Liquidity. The Bank operated with a higher level of cash
and investment securities relative to the Peer Group (37.1 percent of
assets versus 25.0 percent for the Peer Group). Summit's future
borrowing capacity was
<PAGE>
RP Financial, LC.
Page 4.4
considered to be comparable to the Peer Group's, in light of the
similar level of borrowings currently maintained by the Peer Group and
the Bank. Overall, balance sheet liquidity for the Bank was considered
to be slightly more favorable for the Bank and, thus, RP Financial
concluded that a slight adjustment was warranted for the Bank's
balance sheet liquidity.
o Funding Liabilities. Retail deposits served as the primary
interest-bearing source of funds for the Bank and the Peer Group, with
borrowings being utilized to a similar degree by the Bank and the Peer
Group. Overall, the Bank currently maintains a higher level of
interest-bearing liabilities than the Peer Group (91.9 percent of
assets versus 84.7 percent for the Peer Group), which was attributable
to Summit's lower capital position. Following the stock offering, the
increase in Summit's capital position will address the lower level of
interest-bearing liabilities currently maintained by the Peer Group.
Accordingly, RP Financial concluded that no adjustment was warranted
for Summit's funding composition.
o Capital. The Bank operates with a lower pre-conversion capital ratio
than the Peer Group, 7.5 percent and 11.6 percent of assets,
respectively. This disadvantage will be addressed by the stock
offering, which will provide Summit with a pro forma capital position
that can be expected to be comparable to the Peer Group's
equity-to-assets ratio. Accordingly, RP Financial concluded that no
adjustment was warranted for the Bank's capital position.
On balance, the characteristics of the Bank's and the Peer Group's
financial conditions were not materially different in most respects for
valuation purposes. Accordingly, we concluded that no valuation adjustment was
warranted for the Bank's financial strength.
2. Profitability, Growth and Viability of Earnings
Earnings are a key factor in determining pro forma market value, as the
level and risk characteristics of an institution's earnings stream and the
prospects and ability to generate future earnings heavily influence the multiple
the investment community will pay for earnings. The major factors considered in
the valuation are described below.
o Reported Earnings. The Bank recorded higher earnings on a ROAA basis
(1.06 percent of average assets versus 0.81 percent for the Peer
Group). Gains realized from the sale of investment securities
supported the higher return posted by the Bank, with such gains being
subject to market conditions and, therefore, are not viewed as a
recurring source of income for Summit. Exclusive of the gains, the
Peer Group's earnings were stronger than Bank's. The Peer Group's
stronger earnings resulted from maintenance of a lower level of
operating expenses, which was partially offset by the Bank's higher
net interest margin. Non-interest operating income and loss provisions
were comparable factors in the Bank's and the Peer Group's earnings.
Reinvestment of stock proceeds into interest-earning assets will serve
to increase the Bank's earnings, with the benefit of reinvesting
proceeds expected to be somewhat offset by higher operating expenses
associated with operating as a stock
<PAGE>
RP Financial, LC.
Page 4.5
institution and the implementation of the stock benefit plans.
Overall, no adjustment to the Bank's valuation was warranted for this
factor, as Summit's higher reported earnings were substantially
discounted due to the volatility associated with the gains that were
recorded by Summit.
o Core Earnings. Both the Bank's and the Peer Group's earnings were
derived largely from recurring sources, including net interest income,
operating expenses, and non-interest operating income. In these
measures, the Bank operated with a higher net interest margin, a
higher operating expense ratio and a comparable level of non-interest
operating income. The Bank's higher net interest margin and higher
level of operating expenses translated into a lower expense coverage
ratio (1.17x versus 1.38x for the Peer Group). Likewise, due to the
Bank's higher level of operating expenses, the Peer Group's efficiency
ratio was more favorable than the Bank's (63.7 percent versus 77.0
percent for the Bank). Loss provisions had a comparable impact on the
Bank's and the Peer Group's earnings, even though the Peer Group
exhibited comparatively higher reserve coverage ratios than the Bank's
measures. Overall, these measures, as well as the expected earnings
benefits the Bank should realized from the redeployment of stock
proceeds into interest-earning assets, which will somewhat be negated
by expenses associated with the stock benefit plans and operating as a
stock institution, indicate that Summit's core earnings were not as
strong as Peer Group's and a slight downward adjustment was warranted
for the Bank's core earnings.
o Interest Rate Risk. Quarterly changes in the Bank's and the Peer
Group's net interest income to average assets ratios indicated a
similar degree of interest rate risk exposure in their respective net
interest margins, with both the Bank's and the Peer Group's net
interest margins exhibiting fairly limited quarterly fluctuations
during the twelve month period ended March 31, 1998. Other measures of
interest rate risk, such as capital ratios, IEA/IBL ratios, and the
level of non-interest earning assets-to-total assets were generally
more favorable for the Peer Group, although the Bank maintained a
lower level of non-interest earning assets as compared to the Peer
Group's ratio. On a pro forma basis, the infusion of stock proceeds
can be expected to address the Bank's lower capital position and lower
IEA/IBL ratio, as well as enhance the stability of the Bank's net
interest margin through the reinvestment of stock proceeds into
interest-earning assets. Accordingly, RP Financial concluded that the
interest rate risk associated with the Bank's earnings was comparable
to the Peer Group's, and no adjustment was warranted for valuation
purposes.
o Credit Risk. Loan loss provisions were a similar factor in Summit's
and the Peer Group's earnings. In terms of future exposure to credit
quality related losses, both the Bank's and the Peer Group's operating
strategies and credit quality measures indicated relatively limited
credit risk exposure. Lending diversification into higher risk types
of loans was more notable for the Bank, although the Peer Group's
interest-earning asset composition reflected a higher concentration of
loans and resulting lower concentration of cash and investments. The
Peer Group's credit quality measures were considered to be slightly
more favorable than Summit's, based on the Peer Group's higher level
of loss reserves as a percent of problem assets and total loans.
Overall, RP Financial concluded that the credit risk exposure
associated with the Peer
<PAGE>
RP Financial, LC.
Page 4.6
Group's earnings was modestly less than Summit's earnings credit risk
exposure and a slight downward adjustment was warranted for valuation
purposes.
o Earnings Growth Potential. Several factors were considered in
assessing earnings growth potential. First, the Bank's recent
historical growth has been greater than the Peer Group's. Second, the
infusion of stock proceeds will increase the Bank's earnings growth
potential with respect to leverage capacity and providing the Bank
with additional liquidity for purposes of funding loan growth.
Finally, the Peer Group companies on average are larger than the Bank,
which provides more flexibility in diversifying operations. Overall,
the Bank's earnings growth potential appears to be more favorable than
that of the Peer Group's, and, thus, we concluded that a slight upward
adjustment was warranted for this factor.
o Return on Equity. Following the infusion of stock proceeds, the Bank's
pro forma capital position will be comparable to or higher than the
Peer Group's equity-to-assets ratio. Likewise, as the result of the
increase in the Bank's capital position, Summit's pro forma ROE is
expected to be lower than the Peer Group's ROE. Therefore, RP
Financial concluded that a slight down adjustment was warranted for
the Bank's ROE.
Overall, Summit's earnings characteristics were considered to be less
favorable than the Peer Group's. Accordingly, RP Financial concluded that a
slight downward valuation adjustment was warranted for profitability, growth and
viability of the Bank's earnings.
3. Asset Growth
Summit exhibited a significantly higher asset growth rate than the Peer
Group, during the period covered in our comparative analysis (positive 33.5
percent versus positive 14.5 percent for the Peer Group). While the Bank's
current capacity to sustain a higher growth rate than the Peer Group is somewhat
limited by its lower capital position, Summit's pro forma capital position will
provide the Bank with comparable leverage capacity as maintained by the Peer
Group. On balance, we believe a slight upward valuation adjustment was warranted
for this factor.
4. Primary Market Area
The general condition of a financial institution's market area has an
impact on value, as future success is in part dependent upon opportunities for
profitable activities in the local market area. Operating in the Boston
metropolitan area, the Bank faces significant competition for loans and deposits
from larger financial institutions, who provide a broader array of services and
have significantly larger branch networks than maintained by the Bank. Summit's
<PAGE>
RP Financial, LC.
Page 4.7
primary market area for deposits and loans is considered to be Norfolk County,
where all five of the Bank's branches are located. A growing Boston economy has
translated into favorable demographic growth for the Bank's primary market area,
as measure by growth in population and households during the 1990s. Per capita
and household income measures indicate that the Bank operates in a relatively
affluent market area, which is also viewed as a positive in terms of limiting
credit risk exposure and supporting growth opportunities.
In general, the Peer Group companies operate in less populous markets than
served by the Bank. Population growth rates in the markets served by the Peer
Group companies were on average less favorable than the primary market area
served by the Bank. On average, the Peer Group companies maintained a larger
deposit market share than the Bank, indicating a competitive advantage for the
Peer Group companies in terms of the degree of competition faced for deposits.
Summary demographic and deposit market share data for the Bank and the Peer
Group companies is provided in Table 4.1. Overall, the faster growing market
served by Summit was partially offset by the competitive advantage maintained by
the Peer Group companies in terms of deposit market share. Therefore, we
concluded that a slight upward adjustment was warranted for the Bank's primary
market area.
5. Dividends
While the Board has not indicated its intention to commence payment of a
cash dividend following the stock offering, Summit's pro forma capitalization
and profitability clearly position the Bank to have the capacity to pay cash
dividends. Future declarations of dividends by the Board of Directors will
depend upon a number of factors, including investment opportunities, growth
objectives, financial condition, profitability, tax considerations, minimum
capital requirements, regulatory limitations, stock market characteristics and
general economic conditions. As publicly-traded thrifts' capital levels and
profitability have improved and as weak institutions have been resolved, the
proportion of institutions with cash dividend policies has increased. Fifteen
out of the 19 institutions in the Peer Group pay regular cash dividends, with
implied dividend yields ranging from 0.86 percent to 4.08 percent. The Peer
Group companies which completed stock offerings during 1998 accounted for three
out of the four companies that did not reflect payment of a cash dividend. The
average dividend yield on the stocks of the Peer Group institutions was 1.45
percent as of May 29, 1998, representing an average earnings payout ratio of
11.59 percent (see Table 4.6). As of May 29, 1998, approximately 82 percent of
all publicly-traded
<PAGE>
RP Financial, LC.
Page 4.8
Table 4.1
Peer Group Market Area Comparative Analysis
<TABLE>
<CAPTION>
Per Capita Income
Population Proj. ----------------- Deposit
--------------- Pop. 1990-97 1997-2002 % State Market
Institution County 1990 1997 2002 % Change % Change Median Age Amount Average Share(1)
- ----------- ------ ---- ---- ---- -------- -------- ---------- ------ ------- --------
(000) (000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alliance Bank MHC of PA Delaware 548 547 547 -0.1% -0.1% 36.6 22,326 123.9% 2.7%
Brookline Bncrp MHC of MA Norfolk 616 641 658 4.0% 2.7% 36.8 24,273 119.5% 5.2%
Community Svgs MHC of FL Palm Beach 864 1,012 1,115 17.2% 10.1% 40.9 21,754 126.2% 1.9%
Fidelity FSB, MHC of FL Palm Beach 864 1,012 1,115 17.2% 10.1% 40.9 21,754 126.2% 3.8%
First Carnegie MHC of PA Allegheny 1,336 1,286 1,252 -3.8% -2.6% 38.8 18,708 103.9% 0.2%
First FS&LA MHC of IA Woodbury 98 103 106 4.9% 3.2% 34.3 16,764 102.1% 14.4%
Gaston Bancorp MHC of NC Gaston 175 184 190 5.0% 3.3% 35.0 17,027 97.2% 9.6%
Harris SB MHC of PA Dauphin 238 248 255 4.2% 2.8% 37.4 18,993 105.4% 6.6%
Jacksonville SB MHC of IL Morgan 36 36 36 -0.4% -0.3% 36.1 16,672 84.5% 19.7%
Leeds FSB MHC of MD Baltimore 692 721 741 4.2% 2.8% 37 21,680 102.1% 2.0%
Niagara Bancorp MHC of NY Niagara 221 221 221 0.1% 0.1% 36.2 13,239 71.5% 13.9%
Northwest Bancorp MHC of PA Warren 45 44 44 -1.2% -0.9% 38.3 15,543 86.3% 26.6%
Pathfinder BC MHC of NY Oswego 122 126 128 3.1% 2.1% 32.1 12,294 66.4% 18.2%
People Home SB MHC of PA Beaver 186 187 187 0.3% 0.2% 39.2 13,741 76.3% 7.9%
Peoples Bank MHC of CT Fairfield 828 836 842 1.1% 0.7% 37.4 27,087 129.1% 24.5%
Pulaski SB MHC of NJ Union 494 498 501 0.9% 0.6% 37.2 24,441 101.0% 0.5%
SB of Finger Lakes MHC of NY Ontario 95 100 104 5.3% 3.5% 35.7 15,101 81.6% 13.1%
Wayne S&L Co MHC of OH Wayne 101 110 115 8.2% 5.2% 34.1 16,017 92.9% 10.8%
Webster City FSB MHC of IA Hamilton 16 16 16 0.4% 0.0% 39.1 16,204 98.7% 24.1%
--- --- --- --- --- ---- ------ ----- ----
Averages: 399 417 430 3.7% 2.3% 37.0 18,611 99.7% 10.8%
Medians: 221 221 221 3.1% 2.1% 37.0 17,027 101.0% 9.6%
Summit Bank of MA Norfolk 616 641 658 4.1% 2.7% 36.8 24,273 119.5% 1.0%
</TABLE>
- --------------
(1) Total institution deposits in headquarters county as percent of total
county deposits.
Sources: CACI, SNL Securities
<PAGE>
RP Financial, LC.
Page 4.9
thrifts (non-MHC institutions) have adopted cash dividend policies (see Exhibit
IV-1) exhibiting an average yield of 1.89 percent and an average payout ratio of
36.16 percent. The dividend paying thrifts generally maintain higher than
average profitability ratios, facilitating their ability to pay cash dividends.
Our valuation adjustment for dividends for Summit as an MHC also considered
the FDIC policy with regard to waiver of dividends by the MHC. Under current
FDIC policy, any waiver of dividends by the MHC may require the minority
stockholders' ownership interest to be reduced in a "second step" conversion to
reflect the cumulative waived dividend account. Currently, those institutions in
the Peer Group who are subject to OTS oversight and formed their MHCs prior to
the current dividend waiver policy that became effective February 1, 1995 are
not subject to the dividend waiver issue in a second step conversion (i.e. they
are "grandfathered"), except in the case of special dividends or regular
dividends that are deemed "excessive" and were waived by the MHC. The practice
of the majority of public MHC institutions in the Peer Group has been for the
MHC to waive its right to the dividend. Summit has indicated that, in the case
of Service Bancorp, the MHC also intends to waive its right to the dividend.
Summit will be subject to the current FDIC policy with regard to dividend
waivers, while seven of the Peer Group members are not currently subject to such
a policy (due to "grandfathering").
The Holding Company has the capacity to pay a dividend comparable to the
Peer Group based on pro forma capitalization and profitability. Accordingly, we
concluded that a slight downward adjustment was warranted for purposes of
dividends relative to the Peer Group, based on the comparative advantage
maintained by some of the Peer Group companies with respect to the dividend
waiver issue.
6. Liquidity of the Shares
The Peer Group is by definition composed of companies that are traded in
the public markets, and all of the Peer Group members trade on the NASDAQ
system. Typically, the number of shares outstanding and market capitalization
provides an indication of how much liquidity there will be in a particular
stock. The market capitalization of the Peer Group companies, based on the
shares issued and outstanding to public shareholders (i.e., excluding the
majority ownership interest owned by the respective MHCs) ranged from $13.1
million to $932.4 million as of May 29, 1998, with average and median market
values of $121.9 million and $35.4 million, respectively. The public shares
issued and outstanding to the public
<PAGE>
RP Financial, LC.
Page 4.10
shareholders of the Peer Group members ranged from approximately 580,000 to 24.5
million, with average and median shares outstanding of approximately 4.9 million
and 1.3 million, respectively. The Bank's minority stock offering is expected to
result in shares outstanding that approximates or be will be slightly lower than
the Peer Group median, while Summit's market capitalization will be less than
comparative Peer Group median. Accordingly, we anticipate that the liquidity in
the Bank's stock will be less compared to most of the Peer Group companies'
stocks. However, it is anticipated that the Holding Company's stock will be
listed on NASDAQ, which will provide for a certain degree of liquidity in the
stock. Overall, we concluded a slight downward adjustment was warranted for this
factor.
7. Marketing of the Issue
Three separate markets exist for thrift stocks: (1) the after-market for
public companies, both fully-converted stock companies and MHCs, in which
trading activity is regular and investment decisions are made based upon
financial condition, earnings, capital, ROE, dividends and future prospects; (2)
the new issue market in which converting thrifts are evaluated on the basis of
the same factors but on a pro forma basis without the benefit of prior
operations as a publicly-held company and stock trading history; and (3) the
thrift acquisition market. All three of these markets were considered in the
valuation of the Bank's to-be-issued stock.
A. The Public Market
The value of publicly-traded thrift stocks is easily measurable, and is
tracked by most investment houses and related organizations. Exhibit IV-1
provides pricing and financial data on all publicly-traded thrifts. In general,
thrift stock values react to market stimuli such as interest rates, inflation,
perceived industry health, projected rates of economic growth, regulatory issues
and stock market conditions in general. Exhibit IV-2 displays historical stock
market trends for various indices and includes historical stock price index
values for thrifts and commercial banks. Exhibit IV-3 displays historical stock
price indices for thrifts only.
In terms of assessing general stock market conditions, the stock market has
generally trended higher over the past year. News of a budget agreement and a
favorable ruling for tobacco companies sent the stock market soaring to record
highs in early-May 1997. Mixed economic data and the Federal Reserve's decision
to leave its target for the federal funds rate unchanged at its May meeting
sustained a positive trend in the stock market through
<PAGE>
RP Financial, LC.
Page 4.11
the end of May. Profit worries caused a sell-off in technology stocks in
early-June, while declining interest rates served to stabilize the broader
market. Technology stocks rallied the stock market to new highs in mid-July, as
a number of technology companies posted favorable second quarter earnings.
Favorable inflation data, including second quarter GDP growth slowing to an
annual rate of 2.2 percent, versus 4.9 percent in the first quarter, and
comments by the Federal Reserve Chairman which indicated that an increase in
interest rates was not imminent, spurred bond and stock prices strongly higher
during the second half of July.
A decline in the July 1997 unemployment rate reversed the positive bond and
stock market trends in early-August, as inflation concerns became more
prominent. A declining dollar against the yen and mark sharpened the decline in
bond prices, with the 30-year U.S. Treasury bond yield increasing from 6.32
percent at the end of July to 6.66 percent as of August 8, 1997. The sell-off in
bonds pulled stock prices lower as well. While bond prices firmed in mid-August,
notable volatility was evident in the stock market. The Dow Jones Industrial
Average ("DJIA") moved at least 100 points for five consecutive days from August
18, 1997 through August 21, 1997, which set a record for volatility. Profit
worries among some of the large blue chip companies and mixed inflation readings
were factors contributing to the roller-coaster performance of the stock market.
Despite strengthening bond prices, stocks traded lower through the end of
August. Bond prices moved higher on inflation data which showed that prices
stayed low during the second quarter, even though second quarter GDP growth was
revised upward to an annual rate of 3.6 percent compared to an original estimate
of 2.2 percent.
Volatility returned to the stock market in early-September, with the DJIA
posting a record breaking point increase of 257.36 on September 2, 1997. The
rally was sparked by economic data that indicated manufacturing growth slowed in
August, thereby easing investors' inflation worries. However, the rally was not
sustained, as the DJIA pulled back following the one day rally. The pull back
was largely attributed to profit worries, which more than offset favorable
inflation news indicated by a slight increase in the national unemployment rate
for August (4.9 percent in August versus 4.8 percent in July). Stocks fluctuated
in a narrow trading range in mid-September, in anticipation of third quarter
earnings and August economic data. The low inflation reading indicated by the
August consumer price index sent stock and bond prices sharply higher on
September 16, 1997, with the DJIA posting a 175 point increase and the yield on
the 30-year U.S. Treasury bond posting its second largest decline in the 1990s.
Uncertainty over third quarter earnings provided for a mixed stock
<PAGE>
RP Financial, LC.
Page 4.12
market performance towards the end of September, while generally favorable
inflation readings pushed interest rates to their lowest level in two years. The
release of September employment data on October 3, 1997 caused bond and stock
prices to soar in early trading activity, as the September unemployment rate was
unchanged at 4.9 percent and fewer jobs than expected were added to the economy
during September. However, most of the initial gains were erased by news of
rising tensions between Iraq and Iran.
Congressional testimony by the Federal Reserve Chairman, in which he
indicated that it would be difficult to maintain the current balance between
tight labor markets and low inflation, caused stock and bond prices to skid in
mid-October 1997. Disappointing third quarter earnings in the technology sector
sharpened the sell-off in the stock market, with the Dow Jones Industrial
Average posting consecutive losses of more than 1.0 percent on October 16 and
17.
Stocks bounced back in early-week trading the following week, reflecting
positive third quarter earnings surprises posted by some of the blue chip
stocks. However, the recovery was abbreviated by global selling pressure, which
was led by the decline in the Hong Kong stock market, as the DJIA posted a
two-day loss approximating 320 points on October 23 and 24, 1997. The sell-off
in the world financial markets turned into a rout on the following Monday, with
a 5.8 percent decline in the Hong Kong stock market fueling the largest ever
point decline in the DJIA. On October 27, the DJIA declined 554 points or 7.2
percent. While the selling was broad based, technology stocks sensitive to Asian
demand experienced some of the sharpest declines. The turmoil in the stock
market provided for a sharp rally in U.S. Treasury bonds, reflecting a flight to
quality by skittish investors. The stock market recovered strongly the day after
the record breaking point decline, as the DJIA surged a record breaking 337
points on October 28. Comparatively, bond prices declined sharply on October 28,
as investors pulled out of the Treasury market to reinvest into the stock
market.
Market conditions remained uneven through the week ended October 31, 1997,
which was followed by a soaring stock market on November 3, 1997. The DJIA
posted a 232 point increase on November 3, which was supported by a resurgence
in the Hong Kong market. Following the one day rally, volatility returned to the
stock market through mid-November. The market's uneven performance was largely
attributable to the ongoing influence of the international markets, particularly
the Asian and Latin American markets. In mid-November, the yield on the 30-year
bellwether Treasury issue approached 6.0 percent, its
<PAGE>
RP Financial, LC.
Page 4.13
lowest level since February 1996. Advances in the bond market provided for a
generally positive stock market environment in the second half of November, with
bank and technology issues being among the strongest performers. Renewed
confidence that the Asian governments would control the region's financial
problems furthered the stock market rally in early-December. Despite a sell-off
in the bond market caused by the November unemployment rate dropping to its
lowest level since October 1973, the DJIA showed surprising strength and closed
almost 99 points higher on December 5, 1997. Stocks declined the following week,
as earnings concerns, particularly in the technology sector, overshadowed a
rally in the bond market. Positive inflation news and world market turmoil
caused investors to dump stocks in favor of bonds, which served to push the
yield on the bellwether 30-year Treasury bond below 6.0 percent in mid-December.
Bond prices were also boosted by the Federal Reserve's decision to leave
interest rates unchanged at its mid-December meeting, which also provided for a
modest recovery in the stock market. In late-December, investors dumped stocks
on earnings concerns, while a flight to quality pushed bond prices higher. The
stock market surged higher at year end, as worries about South Korea's financial
crisis eased.
Led by a rally in the bond market, stocks continued to move higher at the
beginning of 1998. However, turmoil in the Asian markets and the uncertain
outlook for fourth quarter earnings provided for an uneven stock market through
most of January and into early-February. For example, the Dow Jones Industrial
Average ("DJIA") plunged 222 points on January 9, 1998, due to fourth quarter
profit worries and economic turmoil in Southeast Asia. Comparatively, a rally in
the Asian markets propelled the DJIA 201 points higher on February 2, 1998. In
general, a rebound in the Asian markets and favorable fourth quarter earnings
served to the push the stock market higher during the second half of January and
into early-February. In contrast, bond prices edged lower over the same time
period, as the labor market remained tight as indicated by a sharp increase in
labor costs during the fourth quarter of 1997 and a larger than expected
increase in the number of jobs added during December 1997.
Strength primarily in technology stocks pushed the DJIA to a record high
for the first time in six months on February 10, 1998. The rally was sustained
through mid-February, as the DJIA established six consecutive new highs through
February 18, 1998. Strong earnings and expectations that profitability was not
as badly hurt by the Asian crisis as feared served as the basis for the rally in
technology stocks. Stable interest rates and few signs
<PAGE>
RP Financial, LC.
Page 4.14
of inflation preserved the positive market environment through the end of
February, with blue chip stocks leading the advance.
At the beginning of March 1998, signs of a strengthening economy pushed the
30-year bellwether bond above 6.0 percent for the first time in three months.
Earnings concerns, particularly in the technology sector, provided for an uneven
stock market in early-March. Despite a decline in the February unemployment rate
to 4.6 percent, bond prices advanced on news of a loss of jobs in the
manufacturing sector and stocks moved higher as technology issues rallied. Both
bond and stock prices benefitted from plunging oil prices in mid-March, as
further new highs were established in the DJIA and the yield on 30-year bond
moved back below 6.0 percent. In late-March 1998, stocks drifted lower due to
first quarter earnings worries and uncertainty over the outcome of the Federal
Reserve's meeting at the end of March.
Stocks and bonds moved higher in early-April 1998, following the Federal
Reserve's decision not to raise interest rates. Aided by the $82.9 billion
merger agreement between Travelers Group and Citicorp, the Dow Jones Industrial
Average closed above 9000 for the first time on April 6, 1998. The positive
trend in stocks strengthened through mid-April, reflecting a more bullish
outlook for technology stocks and expectations of further consolidation among
financial stocks punctuated by BankAmerica's merger pact with NationsBank in a
deal valued at $60 billion and Banc One's proposed $30 billion merger with
FirstChicago. Profit taking and speculation that the Federal Reserve was leaning
towards raising interest rates provided for a late-April sell-off in both stocks
and bonds. The threat of higher interest rates pushed the 30-year bellwether
bond back above 6.0 percent in late-April, its highest level since early-March.
Stocks recovered in early-May 1998, as first quarter economic data
reflected a strong pace of economic expansion with declining inflation. The
favorable economic data powered the DJIA to a new high in early-May, while the
yield on the 30-year bond move back below 6.0 percent. Uncertainty over the
possibility of a rate increase by the Federal Reserve provided for a narrow
trading range through mid-May, while the announced merger between Chrysler and
Daimler-Benz had little impact on the overall market. The stock market reacted
positively to the Federal's decision to leave interest rates at its mid-May
meeting, although the rally was stalled by earnings concerns in the technology
sector. Economic turmoil in Asia and Russia's faltering economy caused stocks to
slide further at the end of May. On May 29, 1998, the DJIA closed at 8899.95, an
increase of 21.4 percent from one year ago.
<PAGE>
RP Financial, LC.
Page 4.15
Similar to the overall stock market, the market for thrift stocks has
generally been favorable during the past twelve months. Favorable inflation data
and the budget agreement provided for a substantial rally in thrift stocks in
late-April and early-May 1997, as interest rate sensitive issues were bolstered
by declining interest rates. Thrift stocks continued to trend higher through
June and early-July 1997, based on the improved interest rate outlook and an
overall positive outlook for the economy. Generally favorable second quarter
earnings and the 30-year U.S. Treasury bond yield declining below 6.50 percent
served to further boost thrift prices in mid-July, with the declining interest
rate environment serving to sustain the rally in thrift prices through the end
of July.
Thrift prices generally declined during the first half of August 1997, due
to higher interest rates and profit taking. From July 31, 1997 to August 15,
1997, the SNL Index declined by 3.7 percent. Thrift prices recovered modestly
during the second half of August, as the Federal Reserve left short-term
interest rates unchanged at its August meeting. Thrift stocks participated in
the one day stock market rally on September 2, 1997, as evidenced by a 1.95
percent increase in the SNL Index. News of NationsBank's proposed acquisition of
Barnett Banks for more than four times its book value appears to have further
contributed to the one day run-up in thrift prices. In contrast to the overall
stock market, thrift prices continued to move higher following the one day rally
in the DJIA. Stable interest rates and acquisition news sustained the positive
market for thrift issues. The decline in interest rates following the release of
the August consumer price index in mid-September served to further the rally in
thrift prices. During late-September and early-October, interest rate sensitive
issues in general benefited from the declining interest rate environment and
expectations of strong third quarter earnings.
The upward trend in thrift prices stalled in mid-October 1997, as interest
rates moved higher following warnings by the Federal Reserve Chairman of
inflation creeping back into the economy due to the tight labor markets. Thrift
stocks gyrated in conjunction with the overall market in late-October, with the
SNL index declining by 5.2 percent on October 27 and increasing by 2.4 percent
on October 28. Thrift prices further recovered on October 29, which was
supported by a rally in the bond market. Aided by the favorable interest rate
climate, thrift stocks posted further gains in early-November and then retreated
modestly in mid-November. Thrift and bank issues declined on concerns that a
slowing U.S. economy could lead to weaker loan demand and higher delinquency
rates. However, led by the strengthening bond market, thrift and bank issues
moved higher during late-November and
<PAGE>
RP Financial, LC.
Page 4.16
early-December. Acquisition news also contributed to the upturn in bank and
thrift prices, as two major bank acquisitions were announced for relatively high
price-to-book multiples. First Union Corp.'s proposed acquisition of CoreStates
Financial ($47 billion in assets) was for 539 percent of book value, while First
American Corporation's proposed acquisition for Deposit Guaranty Corporation
($6.8 billion in assets) was for 419 percent of book value. Those deals, along
with speculation of possible other major thrift and bank acquisitions, filtered
into the prices of bank and thrift issues in general. Concern of relatively high
valuations somewhat offset the declining interest rate environment, as thrift
issues traded in a narrow range in mid-December. Thrift prices moved higher at
the close of 1997, as interest rates continued to decline.
The positive trend in thrift prices was not sustained at the beginning of
1998, as thrift prices moved sharply lower during early-January trading. From
January 2, 1998 to January 9, 1998, the SNL Index for all publicly-traded
thrifts declined from 810.5 to 720.2, or 11.1 percent. The sell-off in thrift
stocks was prompted by concerns that the flattening yield curve would put
pressure on earnings, particularly among institutions which maintained high
concentrations of mortgage loans. Thrift prices recovered somewhat during the
second half of January, with the upward trend becoming more pronounced in
early-February. Fourth quarter earnings, which generally met expectations, and
acquisition news led the recovery in thrift prices. The ongoing trend of
consolidation was highlighted by the proposed merger between First Nationwide
Holdings ($30.9 billion in assets) and Golden State Bancorp ($16.0 billion in
assets), which was announced in early-February. Stable interest rates and
acquisitions provided for a mildly positive increase in thrift stocks during the
balance of February.
Thrift issues continued to edge higher during the first half of March 1998,
reflecting improving fundamentals and improving expectations of favorable first
quarter earnings. The announcement of Washington Mutual's acquisition of H.F.
Ahmanson for 390 percent of book value on March 17, 1998 provided a more notable
boost to thrift prices, particularly the stocks of the California-based
institutions. Thrift issues traded in a narrow range in late-March 1998,
reflecting uncertainty over the possibility of higher interest rates and
forthcoming first quarter earnings.
The Federal Reserve's decision to leave interest rates unchanged at its
late-March meeting, along with the mega mergers occurring within the financial
services sector, provided for a positive trend in thrift prices during the first
half of April 1998. However, bank and thrift issues experienced selling pressure
in late-April, reflecting speculation of
<PAGE>
RP Financial, LC.
Page 4.17
higher interest rates which triggered a sell-off in the overall market.
Likewise, thrift stocks followed the overall market higher in early-May, as the
inflation data contained in the first quarter growth numbers provided for an
improved interest rate outlook. Speculation of higher interest rates translated
into a fairly flat market for thrift issues through mid-May. Thrift stocks eased
lower in late-May, reflecting the decline in the overall stock market. On May
29, 1998, the SNL Index for all publicly-traded thrifts closed at 867.4, an
increase of 50.1 percent from one year ago.
B. The New Issue Market
In addition to thrift stock market conditions in general, the new issue
market for converting thrifts is also an important consideration in determining
the Bank's pro forma market value. The new issue market is separate and distinct
from the market for seasoned stock thrifts in that the pricing ratios for
converting issues are computed on a pro forma basis, specifically: (1) the
numerator and denominator are both impacted by the conversion offering amount,
unlike existing stock issues in which price change affects only the numerator;
and (2) the pro forma pricing ratio incorporates assumptions regarding source
and use of proceeds, effective tax rates, stock plan purchases, etc. which
impact pro forma financials, whereas pricing for existing issues are based on
reported financials. The distinction between pricing of converting and existing
issues is perhaps no clearer than in the case of the price/tangible book
("P/TB") ratio in that the P/TB ratio of a converting thrift will typically
always result in a discount to tangible book value whereas in the current market
for existing thrifts the P/TB reflects a premium to tangible book value.
Therefore, it is appropriate to also consider the market for new issues, both at
the time of the conversion and in the aftermarket.
In general, the market environment for converting thrift issues was highly
receptive throughout 1997, with most converting issues being oversubscribed and
trading higher in initial trading activity. To date, the positive market
environment for converting thrift issues has been sustained during 1998. Since
early-March 1998, standard conversion offerings completed and began trading have
exhibited an average price increase of 52.6 percent on the first day of trading.
As shown in Table 4.2, the average one week change in price for standard
conversion offerings completed during the latest three month period ending May
29, 1998 equaled positive 57.2 percent. The average pro forma price/tangible
book and core price/earnings ratios of the recent standard conversions was 79.3
percent and 19.6 times, respectively. The conversions that have began trading
since early-March 1998 were all closed at the top of the super range.
<PAGE>
RP Financial, LC.
page 4.18
Table 4.2
Pricing Characteristics and After-Market Trends
Recent Conversions Completed (Last Three Months)
<TABLE>
<CAPTION>
Institutional Information Pre-Conversion Data Offering Information
- --------------------------------------------------------- --------------------------------- --------------------------
Financial Info. Asset Quality
------------------- -------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc.
- ----------- ----- ---- ------ ------ ------ ------ ---- ----- ---- -----
($Mil) (%) (%)(2) (%) ($Mil.) (%) (%)
- ---------------------------------------------------------------------------------------------------------------------------
Standard Conversions
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Columbia Financial of KY ...... KY 04/15/98 CFKY $ 104 12.59% 0.58% 50% $ 26.7 132% 2.8%
Adirondack Fin. Services ...... NY* 04/07/98 Pink 60 5.57% 6.10% 44% 6.6 132% 7.7%
Heritage Bancorp, Inc. ........ SC* 04/07/98 HBSC 252 11.91% 0.54% 106% 69.4 132% 1.9%
Quitman Bancorp, Inc. ......... GA 04/07/98 Pink 40 7.52% 0.42% 209% 6.6 132% 5.7%
EFC Bancorp, Inc. ............. IL 04/06/98 EFC 332 9.71% 0.62% 55% 69.4 132% 2.3%
Northeast Penn. Fin. Corp...... PA 04/01/98 NEP 387 7.63% 0.28% 135% 59.5 132% 2.4%
Bay State Bancorp, Inc. ....... MA 03/31/98 BYS 250 8.08% 0.80% 107% 46.9 132% 3.2%
Independence Community ........ NY* 03/17/98 ICBC 3,794 8.56% 0.69% 117% 704.1 132% 2.3%
Cavalry Bancorp, Inc. ......... TN 03/17/98 CAVB 276 10.69% 0.02% 43% 75.4 132% 1.8%
SFSB Holding Company .......... PA 03/02/98 SFSH 38 9.20% 0.59% 47% 7.3 132% 4.4%
Averages--Standard Conversions: $ 553 9.15% 1.06% 91% $107.2 132% 3.5%
Medians--Standard Conversions: $ 251 8.88% 0.59% 80% $ 53.2 132% 2.6%
Second-Step Conversions
- -----------------------
SouthBanc Shares, Inc. ........ SC* 04/15/98 SBAN $ 292 10.48% 0.30% 362% $ 45.6 132% 2.7%
First Source Bancorp, Inc...... NJ 04/09/98 FSLA 1,049 9.69% 0.54% 107% 165.5 132% 1.4%
Peoples Bancorp, Inc. ......... NJ 04/09/98 TSBS 640 17.18% 0.92% 61% 238.1 132% 0.8%
Pocahontas Bancorp ............ AR* 04/01/98 PFSL 389 6.36% 0.23% 190% 35.7 132% 2.1%
Harbor Florida Bancshares ..... FL* 03/19/98 HARB 1,129 8.95% 0.43% 240% 166.6 132% 1.1%
Averages--2nd Step Conversions: $ 700 10.53% 0.48% 192% $130.3 132% 1.6%
Medians--2nd Step Conversions: $ 640 9.69% 0.43% 190% $165.5 132% 1.4%
Averages--All Conversions: $ 602 9.61% 0.87% 125% $114.9 132% 2.8%
Medians--All Conversions: $ 292 9.20% 0.54% 107% $ 59.5 132% 2.3%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pro Forma Data
Contribution to Insider Purchase ---------------------------------------------
Charitable Found -------------------- Pricing Ratios(4) Financial Charac.
---------------- -------------------- ---------------------
Benefit Plans
------------- Initial
% of Recog. Mgmt.& Dividend Core
Institution Form Offering ESOP Plans Dirs. Yield P/TB P/E(5) P/A ROA TE/A ROE
- ----------- ---- -------- ---- ----- ----- ------ ---- ------ --- --- ---- ---
(%) (%) (%) (%)(3) (%) (%) (x) (%) (%) (%) (%)
- ----------------------------------------------------------------------------------------------------------------------------------
Standard Conversions
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Columbia Financial of KY ...... N.A. N.A. 8.0% 4.0% 7.5% 0.00% 74.5% 23.3x 21.1% 0.9% 28.3% 3.2%
Adirondack Fin. Services ...... N.A. N.A. 8.0% 4.0% 25.5% 0.00% 76.6% N.M. 10.2% -0.5% 13.3% -3.7%
Heritage Bancorp, Inc. ........ N.A. N.A. 8.0% 4.0% 3.6% 2.00% 77.3% 19.3 22.3% 1.2% 28.8% 4.0%
Quitman Bancorp, Inc. ......... N.A. N.A. 8.0% 4.0% 5.8% 2.00% 78.3% 16.7 14.5% 0.9% 18.6% 4.7%
EFC Bancorp, Inc. ............. Stock 8.00% 8.0% 4.0% 4.4% 0.00% 80.5% 18.0 19.1% 1.1% 23.8% 4.5%
Northeast Penn. Fin. Corp. .... Stock 8.00% 8.0% 4.0% 3.6% 0.00% 80.5% 23.7 14.7% 0.6% 18.3% 3.4%
Bay State Bancorp, Inc. ....... Stock 8.00% 8.0% 4.0% 2.7% 0.00% 84.5% 19.0 17.5% 0.9% 20.7% 4.5%
Independence Community ........ Stock 8.00% 8.0% 4.0% 0.1% 0.00% 85.1% 20.2 17.3% 0.6% 20.3% 3.2%
Cavalry Bancorp, Inc. ......... N.A. N.A. 8.0% 4.0% 20.3% 0.00% 79.8% 16.5 21.7% 1.3% 27.2% 4.8%
SFSB Holding Company .......... N.A. N.A. 8.0% 4.0% 7.9% 0.00% 76.1% N.M. 16.6% -0.2% 21.8% -0.9%
Averages--Standard Conversions: N.A. N.A. 8.0% 4.0% 8.1% 0.40% 79.3% 19.6x 17.5% 0.7% 22.1% 2.8%
Medians--Standard Conversions: N.A. N.A. 8.0% 4.0% 5.1% 0.00% 79.0% 19.1x 17.4% 0.9% 21.2% 3.7%
Second-Step Conversions
- -----------------------
SouthBanc Shares, Inc. ........ N.A. N.A. 0.0% 4.0% 24.1% 0.00% 117.6% 26.7x 25.7% 0.9% 21.9% 4.3%
First Source Bancorp, Inc. .... N.A. N.A. 8.0% 4.0% 0.5% 1.00% 129.6% 24.5 26.6% 1.1% 20.5% 5.3%
Peoples Bancorp, Inc. ......... N.A. N.A. 4.0% 4.0% 0.3% 1.00% 114.5% 26.6 42.3% 1.6% 36.9% 4.3%
Pocahontas Bancorp ............ N.A. N.A. 8.0% 4.0% 1.8% 0.00% 120.3% 21.2 15.9% 0.8% 13.2% 5.7%
Harbor Florida Bancshares ..... N.A. N.A. 8.0% 4.0% 20.3% 3.50% 126.5% 17.8 24.1% 1.4% 19.1% 7.3%
Averages--2nd Step Conversions: N.A. N.A. 5.6% 4.0% 9.4% 1.10% 121.7% 23.4x 26.9% 1.2% 22.3% 5.4%
Medians--2nd Step Conversions: N.A. N.A. 8.0% 4.0% 1.8% 1.00% 120.3% 24.5x 25.7% 1.1% 20.5% 5.3%
Averages--All Conversions: .... N.A. N.A. 7.2% 4.0% 8.6% 0.63% 93.4% 21.0x 20.6% 0.8% 22.2% 3.6%
Medians--All Conversions: ..... N.A. N.A. 8.0% 4.0% 4.4% 0.00% 80.5% 20.2x 19.1% 0.9% 20.7% 4.3%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Post-IPO Pricing Trends
--------------------------------------------------------
Closing Price:
--------------------------------------------------------
First After After
IPO Trading % First % First %
Institution Price Day Change Week(6) Change Month(7) Change
- ----------- ----- --- ------ ------- ------ -------- ------
($) ($) (%) ($) (%) ($) (%)
- ----------------------------------------------------------------------------------------------------
Standard Conversions
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Columbia Financial of KY ...... $10.00 $17.13 71.3% $15.94 59.4% $16.00 60.0%
Adirondack Fin. Services ...... 10.00 12.00 20.0% 12.13 21.3% 12.31 23.1%
Heritage Bancorp, Inc. ........ 15.00 22.31 48.7% 22.00 46.7% 22.00 46.7%
Quitman Bancorp, Inc. ......... 10.00 12.81 28.1% 14.31 43.1% 14.75 47.5%
EFC Bancorp, Inc. ............. 10.00 14.75 47.5% 14.94 49.4% 14.69 46.9%
Northeast Penn. Fin. Corp. .... 10.00 15.50 55.0% 15.38 53.8% 15.44 54.4%
Bay State Bancorp, Inc. ....... 20.00 29.87 49.4% 29.63 48.1% 30.56 52.8%
Independence Community ........ 10.00 17.25 72.5% 17.56 75.6% 18.13 81.3%
Cavalry Bancorp, Inc. ......... 10.00 20.56 105.6% 24.38 143.8% 24.00 140.0%
SFSB Holding Company .......... 10.00 12.81 28.1% 13.13 31.3% 14.38 43.8%
Averages--Standard Conversions: $11.50 $17.50 52.6% $17.94 57.2% $18.23 59.6%
Medians--Standard Conversions: $10.00 $16.31 49.0% $15.66 48.8% $15.72 50.2%
Second-Step Conversions
- -----------------------
SouthBanc Shares, Inc. ........ $20.00 $22.75 13.8% $22.50 12.5% $20.88 4.4%
First Source Bancorp, Inc. .... 10.00 10.56 5.6% 10.50 5.0% 10.50 5.0%
Peoples Bancorp, Inc. ......... 10.00 12.00 20.0% 10.56 5.6% 10.50 5.0%
Pocahontas Bancorp ............ 10.00 10.75 7.5% 10.25 2.5% 9.94 -0.6%
Harbor Florida Bancshares ..... 10.00 12.25 22.5% 11.69 16.9% 12.81 28.1%
Averages--2nd Step Conversions: $12.00 $13.66 13.9% $13.10 8.5% $12.93 8.4%
Medians--2nd Step Conversions: $10.00 $12.00 13.8% $10.56 5.6% $10.50 5.0%
Averages--All Conversions: .... $11.67 $16.22 39.7% $16.33 41.0% $16.46 42.6%
Medians--All Conversions: ..... $10.00 $14.75 28.1% $14.94 43.1% $14.75 8.4%
- --------------------------------------------------------------------------------------------------
</TABLE>
Note:* - Appraisal performed by RP Financial; "NT" - Not Traded; "NA" - Not
Applicable, Not Available.
(1) Non-OTS regulated thrift.
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Excludes impact of special SAIF assessment on earnings.
(6) Latest price if offering less than one week old.
(7) Latest price if offering more than one week but less than one month old.
(8) Simultaneously converted to commercial bank charter.
May 29, 1998
<PAGE>
RP Financial, LC.
Page 4.19
In examining the current pricing characteristics of institutions completing
their conversions during the last three months (see Table 4.3), we note a
difference exists in their pricing ratios compared to the universe of all
publicly-traded thrifts. Specifically, the current average P/B ratio of the
conversions completed in the most recent three month period of 143.94 percent
reflects a discount of 14.1 percent from the average P/B ratio of all
publicly-traded thrifts (equal to 167.54 percent), and the 26.63 times core P/E
ratio of the recent conversions was at a 29.1 percent premium to the all public
average core P/E ratio of 20.62 times. The pricing ratios of the better
capitalized but lower earning (based on return on equity measures) recently
converted thrifts suggest that the investment community has determined to
discount their stocks on a book basis until the earnings improve through
redeployment and leveraging of the proceeds over the longer term.
Similar to the market for converting thrifts, the three publicly-traded MHC
offerings that have been completed during 1998 (Brookline Bancorp of MA - March
1998, Niagra Bancorp of NY April 1998 and Gaston Federal Bancorp of NC April
1998) have experienced a favorable market reception as well. Based on May 29,
1998 market prices, the trading prices of Brookline Bancorp, Niagra Bancorp and
Gaston Federal have appreciated in price by 68.1 percent, 58.8 percent and 67.5
percent from their respective IPO prices.
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall thrift market and the new issue market.
The overall market for thrift stocks is considered to be healthy, as thrift
stocks are currently exhibiting pricing ratios that are approaching historically
high levels. Investor interest in the new issue market has been favorable, as
all of the recently completed offerings have been oversubscribed and have
recorded price increases in initial post-conversion trading activity. Conditions
in the new issue market for MHC shares also are viewed as being favorable, based
on the positive market reception that has been experienced by the three
publicly-traded MHC offerings completed during 1998.
C. The Acquisition Market
Also considered in the valuation was the potential impact on Summit's stock
price of recently completed and pending acquisitions of other savings
institutions operating in Massachusetts. As shown in Exhibit IV-4, there were
nine Massachusetts thrifts acquired during 1997 and year-to-date 1998, and there
are currently three acquisitions pending of Massachusetts savings institutions.
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.3
Market Pricing Comparatives
Prices as of May 29, 1998
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization -------------- Pricing Ratios(3) Dividends(4)
--------------- Core Book -------------------------------------- ---------------------
Price/ Market 12-Mth Value/ Amount/ Payout
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/Core Share Yield Ratio(5)
- --------------------- ------ ----- ------ ----- --- --- --- ---- ------ ----- ----- --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
All Public Companies 22.69 253.13 1.01 13.79 19.80 167.54 20.81 173.22 20.62 0.13 1.55 30.77
Converted Last 3 Mths (no MHC) 16.10 247.72 0.47 12.40 26.31 143.94 31.38 146.23 26.63 0.06 0.56 18.52
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
BYS Bay State Bancorp of MA 28.63 72.58 1.05 23.66 27.27 121.01 25.06 121.01 27.27 0.00 0.00 0.00
CAVB Cavalry Bancorp of TN 23.50 177.14 0.43 13.23 NM 177.63 50.49 177.63 NM 0.00 0.00 0.00
CFKY Columbia Financial of KY 15.50 41.40 0.15 13.42 NM 115.50 32.66 311.24 NM 0.00 0.00 0.00
EFC EFC Bancorp Inc of IL 14.00 97.12 0.56 12.42 25.00 112.72 26.80 112.72 25.00 0.00 0.00 0.00
FSLA First Source Bancorp of NJ 10.13 321.53 0.41 7.72 24.71 131.22 26.96 131.22 24.71 0.12 1.18 29.27
HARB Harbor Florida Bancshrs of FL 12.38 380.05 0.45 8.29 26.34 149.34 29.59 150.98 27.51 0.26 2.10 57.78
HBSC Heritage Bancorp, Inc. of SC 21.00 97.21 0.78 19.41 26.92 108.19 31.14 108.19 26.92 0.00 0.00 0.00
HLFC Home Loan Financial Corp of OH 15.75 35.41 0.37 13.82 NM 113.97 44.38 113.97 NM 0.00 0.00 0.00
ICBC Independence Comm Bnk Cp of NY 17.38 1,223.74 0.49 12.55 NM 138.49 30.05 147.91 NM 0.00 0.00 0.00
NEP Northeast PA Fin. Corp of PA 14.88 95.63 0.42 12.43 NM 119.71 21.86 119.71 NM 0.00 0.00 0.00
TSBS Peoples Bancorp Inc of NJ 10.06 364.54 0.15 3.09 NM 325.57 41.01 NM NM 0.10 0.99 66.67
PFSL Pocahontas Bancorp of AR 9.94 66.29 0.35 8.72 27.61 113.99 16.54 113.99 28.40 0.24 2.41 68.57
SBAN SouthBanc Shares Inc. of SC(7) 19.88 14.02 0.73 17.01 27.23 116.87 25.54 116.87 27.23 1.40 7.04 NM
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Financial Characteristics(6)
---------------------------------------------------------
Reported Core
Total Equity/ NPAs/ ------------ -----------
Financial Institution Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------ ------ ------ --- --- --- ---
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
All Public Companies 1,443 13.50 0.65 0.95 8.45 0.90 7.96
Converted Last 3 Mths (no MHC) 816 23.03 0.44 1.01 5.54 0.91 5.06
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
BYS Bay State Bancorp of MA 290 20.71 0.77 0.92 4.44 0.92 4.44
CAVB Cavalry Bancorp of TN 351 28.43 0.01 1.48 7.18 1.02 4.98
CFKY Columbia Financial of KY 127 28.28 NA 0.91 3.20 0.32 1.12
EFC EFC Bancorp Inc of IL 362 23.77 0.46 1.07 4.51 1.07 4.51
FSLA First Source Bancorp of NJ 1,192 20.55 0.47 1.09 5.31 1.09 5.31
HARB Harbor Florida Bancshrs of FL 1,284 19.81 0.47 1.25 11.33 1.20 10.84
HBSC Heritage Bancorp, Inc. of SC 312 28.79 NA 1.16 4.02 1.16 4.02
HLFC Home Loan Financial Corp of OH 80 38.94 0.44 1.30 5.70 1.30 5.70
ICBC Independence Comm Bnk Cp of NY 4,072 21.70 0.70 0.64 2.95 0.85 3.90
NEP Northeast PA Fin. Corp of PA 437 18.26 0.22 0.62 3.38 0.62 3.38
TSBS Peoples Bancorp Inc of NJ 889 12.60 0.64 1.06 6.69 0.79 5.02
PFSL Pocahontas Bancorp of AR 401 14.51 0.25 0.62 7.74 0.61 7.53
SBAN SouthBanc Shares Inc. of SC(7) 117 21.85 NA 0.94 4.29 0.94 4.29
</TABLE>
- -----------------
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E - Price to earnings; P/B - Price to book; P/A - Price to assets; P/TB -
Price to tangible book value; and P/CORE - Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the accuracy
or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.21
Under other circumstances, the existence of thrift acquisition activity in
the Bank's market area might warrant an upward adjustment to value to account
for the likelihood of investors placing an acquisition premium on the stock.
However, the acquisition activity in Summit's market was deemed to have a
minimal valuation impact for three reasons. First, Summit's Board of Directors
has stated their intention to remain independent following the stock offering, a
factor underscored by the Board's decision to reorganize into MHC form. Second,
Summit could not become an acquisition target for at least one year following a
second step conversion, pursuant to current conversion regulations. Finally, the
Bank has no immediate intentions to pursue a "second step" conversion.
* * * * * * * * * * *
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall thrift market, the new issue market
including the new issue market for MHC shares, and the acquisition market (which
we considered to be not highly applicable to the Bank's valuation). Taking these
factors and trends into account, RP Financial concluded that no adjustment was
appropriate in the valuation analysis for purposes of marketing of the issue.
8. Management
Summit's management team has experience and expertise in all of the key
areas of the Bank's operations. Exhibit IV-5 provides summary resumes of
Summit's Board of Directors and executive management. While the Bank does not
have the resources to develop a great deal of management depth, given its asset
size and the impact it would have on operating expenses, management and the
Board have been effective in implementing an operating strategy that can be well
managed by the Bank's present management structure.
Similarly, the returns, capital positions, and other operating measures of
the Peer Group companies are indicative of well-managed financial institutions,
which have Boards and management teams that have been effective in implementing
competitive operating strategies. Therefore, on balance, we concluded no
valuation adjustment relative to the Peer Group was appropriate for this factor.
<PAGE>
RP Financial, LC.
Page 4.22
9. Effect of Government Regulation and Regulatory Reform
In summary, as a BIF-insured savings bank operating in the MHC form of
ownership, Summit will operate in substantially the same regulatory environment
as the Peer Group members -- all of whom are adequately capitalized institutions
and are operating with no apparent restrictions. Exhibit IV-6 reflects the
Bank's pro forma regulatory capital ratios. The one difference noted between
Summit and the Peer Group was in the area of regulatory policy regarding
dividend waivers (see the discussion above for "Dividends"). The Bank and a
majority of the Peer Group members are subject to minority dilution in a second
step conversion because of the current dividend waiver policy, while a minority
of the Peer Group companies are not subject to the current policy regarding
dividend waivers as the result of "grandfathering" under the previous OTS
guidelines. Because a downward adjustment was already applied for this factor in
the "Dividends" section of this appraisal, no further adjustment has been
applied for the effect of government regulation and regulatory reform.
Summary of Adjustments
Overall, based on the factors discussed above, we concluded that the Bank's
pro forma market value should be discounted relative to the Peer Group as
follows:
Key Valuation Parameters: Valuation Adjustment
- ------------------------- --------------------
Financial Condition No Adjustment
Profitability, Growth and Viability of Earnings Slight Downward
Asset Growth Slight Upward
Primary Market Area Slight Upward
Dividends Slight Downward
Liquidity of the Shares Slight Downward
Marketing of the Issue No Adjustment
Management No Adjustment
Effect of Government Regulations and Regulatory Reform No Adjustment
Basis of Valuation. Fully-Converted Pricing Ratios
As indicated in Chapter III, the valuation analysis included in this
section places all of the public MHC institutions on equal footing by restating
their financial data and pricing ratios on a "fully-converted" basis. We believe
there are a number of characteristics of MHC shares that make them different
from the shares of fully-converted companies. These factors include: (1) lower
aftermarket liquidity in the MHC shares since less than 50 percent of the shares
are
<PAGE>
RP Financial, LC.
Page 4.23
available for trading; (2) guaranteed minority ownership interest, with no
chance of exercising voting control of the institution; (3) no possibility of
acquisition speculation to support stock prices; (4) the impact of "second step"
conversions on the pricing of MHC institutions; and (5) the current FDIC policy
regarding the waiver of dividends by MHC institutions. The above characteristics
of MHC shares have provided MHC shares with different trading characteristics
versus fully-converted companies. To account for the unique trading
characteristics of MHC shares, RP Financial has placed the financial data and
pricing ratios of the Peer Group on a fully-converted basis to make them
comparable for valuation purposes. Using the per share and pricing information
of the Peer Group on a fully-converted basis accomplishes two things. First,
such figures eliminate the distortions resulting when trying to compare
institutions that have a different public ownership interests outstanding.
Secondly, such an analysis provides ratios that are comparable to the pricing
information of fully-converted public companies, and more importantly, are
directly applicable to determining the pro forma market value range of the 100
percent ownership interest in Summit as an MHC.
To calculate the fully-converted pricing information for MHCs, the reported
financial information for the public MHCs was adjusted as follows: (1) a second
step conversion was assumed, with all shares owned by the MHC assumed to be sold
at the May 29, 1998 trading price; (2) the gross proceeds from such a sale were
adjusted to reflect reasonable offering expenses and standard stock based
benefit plan parameters that would be factored into a "second step" conversion
of MHC institutions; and (3) book value per share and earnings per share figures
for the public MHCs were adjusted by the impact of the assumed second step
conversion, resulting in an estimation of book value per share and earnings per
share figures on a fully-converted basis. Since they place the public MHC
institutions on a fully-converted basis using the same approach as utilized in
the several second step conversions completed to date, these per share figures
(fully-converted basis) are comparable to the per share financial information
reported by fully-converted public companies and can form the basis for
estimating the pro forma market value range of a 100 percent ownership interest
in Summit. Table 4.4 on the following page shows the calculation of per share
financial data (fully-converted basis) for each of the 19 public MHC
institutions that form the Peer Group.
Valuation Approaches
In applying the accepted valuation methodology promulgated by the OTS and
adopted by the FDIC, i.e., the pro forma market value approach, we considered
the three key pricing
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4
Calculation of Implied Per Share Data --
Incorporating MHC Second Step Conversion
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1998
<TABLE>
<CAPTION>
Current Ownership Current Per Share Data (MHC Ratios)
---------------------------- --------------------------------------------
Total Public MHC Core Book Tangible
Shares Shares Shares EPS EPS Value Book Assets
------ ------ ------ --- --- ----- ---- ------
(000) (000) (000) ($) ($) ($) ($) ($)
Publicly-Traded MHC Institutions
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ALLB Alliance Bank MHC of PA(19.9) ........ 3,273 650 2,623 0.62 0.62 8.93 8.93 83.33
BRKL Brookline Bncp MHC of MA(47.0) ....... 29,095 13,675 15,420 0.39 0.39 8.56 8.56 49.88
CMSV Commty. Svgs, MHC of FL(48.5) ........ 5,100 2,470 2,630 1.03 0.95 16.11 16.11 149.14
FFFL Fidelity Bcsh MHC of FL(47.7) ........ 6,802 3,224 3,578 1.07 0.92 13.01 12.62 194.16
FFSX First FSB MHC Sxld of IA(46.1) ....... 2,838 1,303 1,535 1.16 1.17 14.15 11.48 201.27
GBNK Gaston Fed Bncp MHC of NC(47.0) ...... 4,497 2,113 2,384 0.43 0.43 8.56 8.56 38.07
HARS Harris Fin. MHC of PA(24.3) .......... 33,942 8,169 25,773 0.55 0.45 5.41 4.86 66.59
JXSB Jcksnville SB, MHC of IL(45.6) ....... 1,908 580 1,328 0.51 0.33 9.23 9.23 88.91
LFED Leeds Fed Bksr MHC of MD(36.3) ....... 5,182 1,883 3,299 0.66 0.66 9.52 9.52 57.70
NBCP Niagara Bancorp of NY MHC(45.4) ...... 29,756 13,502 16,254 0.58 0.58 12.71 12.71 105.69
NWSB Northwest Bcrp MHC of PA(30.7) ....... 46,838 14,352 32,486 0.44 0.44 4.55 4.07 51.44
PBCT Peoples Bank, MHC of CT(40.1) ........ 64,083 24,453 39,630 1.49 0.80 13.18 11.29 142.78
PBHC Pathfinder BC MHC of NY(46.1) ........ 2,831 882 1,949 0.62 0.50 8.15 6.91 69.30
PHSB Ppls Home SB, MHC of PA(45.0) ........ 2,760 1,242 1,518 0.63 0.56 10.33 10.33 80.94
PLSK Pulaski SB, MHC of NJ(46.0) .......... 2,108 952 1,156 0.55 0.55 10.44 10.44 90.50
SBFL SB Fngr Lakes MHC of NY(33.1) ........ 3,570 1,182 2,388 0.26 0.22 6.10 6.10 70.26
SKBO First Carnegie MHC of PA(45.0) ....... 2,300 1,035 1,265 0.41 0.46 10.74 10.74 62.46
WAYN Wayne Svgs Bks MHC of OH(47.8) ....... 2,484 1,075 1,409 0.76 0.71 9.74 9.74 102.71
WCFB Wbstr Cty FSB MHC of IA(45.2) ........ 2,112 950 1,162 0.65 0.65 10.58 10.58 45.04
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Impact of Second Step Conversion Pro Forma Per Share Data (Fully Converted)
--------------------------------------------- ------------------------------------------
Share Gross Net Incr. Net Incr. Core Book Tangible
Price Procds(1) Capital(2) Income(3) EPS EPS Value Book Assets
----- --------- ---------- --------- --- --- ----- ---- ------
($000) ($000) ($000) ($000) ($) ($) ($) ($) ($)
Publicly-Traded MHC Institutions
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ALLB Alliance Bank MHC of PA(19.9) ... 35.00 91,805 78,952 2,418 1.36 1.36 33.05 33.05 107.45
BRKL Brookline Bncp MHC of MA(47.0) .. 16.81 259,210 222,921 6,826 0.62 0.62 16.22 16.22 57.54
CMSV Commty. Svgs, MHC of FL(48.5) ... 35.38 93,049 80,022 2,450 1.51 1.43 31.80 31.80 164.83
FFFL Fidelity Bcsh MHC of FL(47.7) ... 30.06 107,555 92,497 2,832 1.49 1.34 26.61 26.22 207.76
FFSX First FSB MHC Sxld of IA(46.1) .. 37.25 57,179 49,174 1,506 1.69 1.70 31.84 28.81 218.60
GBNK Gaston Fed Bncp MHC of NC(47.0) . 16.75 39,932 34,342 1,052 0.66 0.66 16.20 16.20 45.71
HARS Harris Fin. MHC of PA(24.3) ..... 25.50 657,212 565,202 17,307 1.06 0.96 22.06 21.51 83.24
JXSB Jcksnville SB, MHC of IL(45.6) .. 22.50 29,880 25,697 787 0.92 0.74 22.70 22.70 102.38
LFED Leeds Fed Bksr MHC of MD(36.3) .. 20.25 66,805 57,452 1,759 1.00 1.00 20.61 20.61 68.79
NBCP Niagara Bancorp of NY MHC(45.4) . 15.88 258,114 221,978 6,797 0.81 0.81 20.17 20.17 113.15
NWSB Northwest Bcrp MHC of PA(30.7) .. 16.25 527,898 453,992 13,902 0.74 0.74 14.24 13.76 61.13
PBCT Peoples Bank, MHC of CT(40.1) ... 38.13 1,511,092 1,299,539 39,793 2.11 1.42 33.46 31.57 163.06
PBHC Pathfinder BC MHC of NY(46.1) ... 22.63 44,106 37,931 1,161 1.03 0.91 21.55 20.31 82.70
PHSB Ppls Home SB, MHC of PA(45.0) ... 20.25 30,740 26,436 809 0.92 0.85 19.91 19.91 90.52
PLSK Pulaski SB, MHC of NJ(46.0) ..... 18.50 21,386 18,392 563 0.82 0.82 19.16 19.16 99.22
SBFL SB Fngr Lakes MHC of NY(33.1) ... 20.00 47,760 41,074 1,258 0.61 0.57 17.61 17.61 81.77
SKBO First Carnegie MHC of PA(45.0) .. 19.88 25,148 21,627 662 0.70 0.75 20.14 20.14 71.86
WAYN Wayne Svgs Bks MHC of OH(47.8) .. 27.25 38,395 33,020 1,011 1.17 1.12 23.03 23.03 116.00
WCFB Wbstr Cty FSB MHC of IA(45.2) ... 19.63 22,810 19,617 601 0.93 0.93 19.87 19.87 54.33
</TABLE>
- -------------
(1) Gross proceeds calculated as stock price multiplied by the number of shares
owned by the mutual holding company (i.e., non-public shares).
(2) Net increase in capital reflects gross proceeds less offering expenses,
contra-equity account for leveraged ESOP and deferred compensation account
for restricted stock plan:
Offering expense percent 2.00
ESOP percent purchase 8.00
Recognition plan percent 4.00
(3) Net increase in earnings reflects after-tax reinvestment income (assumes
ESOP and recognition plan do not generate reinvestment income), less
after-tax ESOP amortization and recognition plan vesting:
After-tax reinvestment 4.29
ESOP loan term (years) 10
Recog. plan vesting (yrs) 5
Effective tax rate 34.00
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.25
ratios in valuing Summit's to-be-issued stock -- price/earnings ("P/E"),
price/book ("P/B"), and price/assets ("P/A") approaches --all performed on a pro
forma basis including the effects of the conversion proceeds. In computing the
pro forma impact of the conversion and the related pricing ratios, we have
incorporated the valuation parameters disclosed in Summit's offering circular
for reinvestment rate, the effective tax rate and stock benefit plan assumptions
(summarized in Exhibits IV-7 and IV-8). Pursuant to the minority stock offering,
we have also incorporated the valuation parameters disclosed in Summit's
offering circular for offering expenses. The assumptions utilized in the pro
forma analysis in calculating the Bank's full conversion value are described
more fully below.
o Conversion Expenses. Have been assumed to equal 3 percent of the
offering amount pursuant to a standard conversion offering, which is
typical of the level of offering expenses recorded in offerings that
are comparable to the Bank's full conversion value.
o Effective Tax Rate. The Bank, in consultation with its outside
auditors, has determined the marginal effective tax rate on the net
reinvestment benefit of the conversion proceeds to be 40 percent.
o Reinvestment Rate. The pro forma section in the prospectus
incorporates a 5.39 percent reinvestment rate, equivalent to the one
year U.S. Treasury rate prevailing as of March 31, 1998. This
calculated rate is reasonably similar to the blended reinvestment rate
in the first 12 months of the business plan post-conversion,
reflecting the current anticipated use of conversion proceeds,
incorporating a flat interest rate scenario and the estimated impact
of deposit withdrawals to fund stock purchases.
o Stock Benefit Plans. The assumptions for the stock benefit plans,
i.e., the Employee Stock Ownership Plan ("ESOP") and Recognition Plan
("Recognition Plan"), are consistent with the structure as approved by
the Bank's Board and the disclosure in the pro forma section of the
prospectus. Specifically, the ESOP is assumed to purchase 8 percent of
the stock in conversion at the initial public offering price, with the
Holding Company funded ESOP loan amortized on a straight-line basis
over 10 years. The Recognition Plan is assumed to purchase 4 percent
of the stock in the aftermarket at a price equivalent to the initial
public offering price.
In our estimate of value, we assessed the relationship of the pro forma
pricing ratios relative to the Peer Group and the recent conversions.
RP Financial's valuation placed an emphasis on the following:
o P/E Approach. The P/E approach is generally the best indicator of
long-term value for a stock. Given the similarities between the Bank's
and the Peer Group's earnings composition and overall financial
condition, the P/E approach was carefully considered in this
valuation. At the same time, since reported earnings for both the Bank
and the Peer Group included certain unusual
<PAGE>
RP Financial, LC.
Page 4.26
operating items, we also made adjustments to earnings to arrive at a
core earnings estimate and the resulting price/core earnings ratio.
o P/B Approach. P/B ratios have generally served as a useful benchmark
in the valuation of thrift stocks, with the greater determinant of
long term value being earnings. RP Financial considered the P/B
approach to be a reliable indicator of value given current market
conditions, particularly the market for new conversions (many of the
recent conversions have reported not meaningful P/E ratios).
o P/A Approach. P/A ratios are generally a less reliable indicator of
market value, as investors do not place significant weight on the size
of total assets as a determinant of market value. Investors place
significantly greater weight on book value and earnings, which have
received greater weight in our valuation analysis. Furthermore, this
approach as set forth in the regulatory valuation guidelines does not
take into account the amount of stock purchases funded by deposit
withdrawals, thus understating the pro forma P/A ratio. At the same
time, the P/A ratio is an indicator of franchise value, and, in the
case of highly capitalized institutions, the high P/A ratios may limit
the investment community's willingness to pay market multiples for
earnings or book value when ROE is expected to be low.
The Bank has adopted Statement of Position ("SOP") 93-6, which will cause
earnings per share computations to be based on shares issued and outstanding
excluding unreleased ESOP shares. For purposes of preparing the pro forma
pricing analyses, we have reflected all shares issued in the offering, including
all ESOP shares, to capture the full dilutive impact, particularly since the
ESOP shares are economically dilutive, receive dividends and can be voted.
However, we did consider the impact of the adoption of SOP 93-6 in the
valuation.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, RP Financial concluded
that the pro forma market value of a 100 percent interest in the Bank's
conversion stock was $20,000,000 at the midpoint, equal to 2,000,000 shares
issued at a per share value of $10.00 for the public shares.
1. Price-to-Earnings ("P/E"). The application of the P/E valuation method
requires calculating the Bank's pro forma market value by applying a valuation
P/E multiple (fully-converted basis) to the pro forma earnings base. Ideally,
the pro forma earnings base is composed principally of the Bank's recurring
earnings base, that is, earnings adjusted to exclude any one-time non-operating
items, plus the estimated after-tax earnings benefit of the reinvestment of net
conversion proceeds. Summit's reported earnings were $1.228 million for the
twelve months ended March 31, 1998. In deriving Summit's core earnings, the only
<PAGE>
RP Financial, LC.
Page 4.27
adjustment made to reported earnings was to eliminate gains on the sale of
investment securities, which totaled $843,000 for the twelve months ended March
31, 1998. On a tax effected basis, assuming an effective marginal tax rate of
40.0 percent, the elimination of the gains resulted in a $506,000 reduction to
the Bank's reported earnings. As shown below, after factoring in the adjustment,
Summit's core earnings were determined to equal $722,000 for the twelve months
ended March 31, 1998. (Note: see Exhibit IV-9 for the adjustments applied to the
Peer Group's earnings in the calculation of core earnings).
Amount
------
($000)
Net income ........................................... $1,228
Gain on sale of investments(1) ....................... (506)
-------
Core earnings estimate .............................. $ 722
--------
(1) Tax effected at 40.0 percent.
Based on Summit's reported and estimated core earnings, and incorporating
the impact of the pro forma assumptions discussed previously, the Bank's pro
forma reported and core P/E multiples (fully-converted basis) at the $20,000,000
midpoint value were 12.61 times and 18.52 times, respectively, which provided
for discounts of 44.9 percent and 22.4 percent relative to the Peer Group's
average reported and core P/E multiples (fully-converted basis) of 22.87 times
and 23.87 times, respectively (see Table 4.5). The discounted earnings multiples
are consistent with the valuation adjustments outlined earlier, as well as
taking into consideration the resulting P/B ratio.
2. Price-to-Book ("P/B"). The application of the P/B valuation method
requires calculating the Bank's pro forma market value by applying a valuation
P/B ratio (fully-converted basis) to Summit's pro forma book value
(fully-converted basis). Based on the $20.0 million midpoint valuation, Summit's
pro forma P/B ratio was 74.38 percent. In comparison to the average P/B ratio
for the Peer Group of 105.61 percent, Summit's ratio was discounted by 29.6
percent. RP Financial considered the discount under the P/B approach to be
reasonable, in light of the previously referenced valuation adjustments and the
nature of the calculation of the P/B ratio which mathematically results in a
ratio discounted to book value. Additionally, the discounted P/B ratio is also
warranted by the likelihood that speculation of a second step conversion may be
having an upward influence on the current stock prices of some
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.5
MHC INSTITUTIONS -- IMPLIED PRICING RATIOS FULL CONVERSION BASIS
Quantum Financial Holdings and the Comparables
As of May 19, 1998
<TABLE>
<CAPTION>
Fully Converted
Implied Value Per Share (8)
----------------- --------------
Implied Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ ----------------------------------------
Share(1) Val(8) EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- -------- ------ ------ ----- ------ ----- ------ ------
Summit Bank ($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Superrange................................ 10.00 26.45 0.45 12.24 15.55 81.71 17.21 81.71 22.13
Range Maximum............................. 10.00 23.00 0.49 12.80 14.03 78.13 15.26 78.13 20.29
Range Midpoint............................ 10.00 20.00 0.54 13.45 12.61 74.38 13.49 74.38 18.52
Range Minimum............................. 10.00 17.00 0.60 14.32 11.10 69.84 11.67 69.84 16.57
All Public Companies....................... 22.69 253.13 1.01 13.79 19.80 167.54 20.81 173.22 20.62
All Non-MHC State of MA(7)
- --------------------------
Averages.................................. 25.61 107.14 1.34 14.33 18.38 191.57 17.97 196.15 17.95
Medians................................... -- -- -- -- 16.73 186.03 17.13 199.57 17.42
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
Averages.................................. 24.10 328.70 0.99 22.64 22.87 105.61 25.14 107.41 23.87
Medians................................... -- -- -- -- 22.30 105.01 24.46 105.90 24.33
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
ALLB Alliance Bank MHC of PA(19.9) ....... 35.00 114.56 1.36 33.05 25.74 105.90 32.57 105.90 25.74
BRKL Brookline Bncp MHC of MA(47.0) ...... 16.81 489.09 0.62 16.22 27.11 103.64 29.21 103.64 27.11
CMSV Commty. Svgs, MHC of FL(48.5) ....... 35.83 180.44 1.43 31.80 23.43 111.26 21.46 111.26 24.74
FFFL Fidelity Bcsh MHC of FL(47.7) ....... 30.06 204.47 1.34 26.61 20.17 112.97 14.47 114.65 22.43
SKBO First Carnegie MHC of PA(45.0)....... 19.88 45.72 0.75 20.14 28.40 98.71 27.66 98.71 26.51
FFSX First FSB MHC Sxld of IA(46.1) ...... 37.25 105.72 1.70 31.84 22.04 116.99 17.04 129.30 21.91
GBNK Gaston Fed Bncp MHC of NC(47.0) ..... 16.75 75.32 0.66 16.20 25.38 103.40 36.64 103.40 25.38
HARS Harris Fin. MHC of PA(24.3) ......... 25.50 865.52 0.96 22.06 24.06 115.59 30.63 118.55 26.56
JXSB Jcksnville SB, MHC of IL(45.6) ...... 22.50 42.93 0.74 22.70 24.46 99.12 21.98 99.12 NM
LFED Leeds Fed Bksr MHC of MD(36.3) ...... 20.25 104.94 1.00 20.61 20.25 98.25 29.44 98.25 20.25
NBCP Niagara Bancorp of NY MHC(45.4) ..... 15.88 472.53 0.81 20.17 19.60 78.73 14.03 78.63 19.60
NWSB Northwest Bcrp MHC of PA(30.7) ...... 16.25 761.12 0.74 14.24 21.96 114.12 26.58 118.10 21.96
PBHC Pathfinder BC MHC of NY(46.1) ....... 22.63 64.07 0.91 21.55 21.97 105.01 27.36 111.42 24.87
PBCT Peoples Bank, MHC of CT(40.1) ....... 38.13 2,443.48 1.42 33.46 18.07 113.96 23.38 120.78 26.85
PHSB Ppls Home SB, MHC of PA(45.0) ....... 20.25 55.89 0.85 19.91 22.01 101.71 22.37 101.71 23.82
PLSK Pulaski SB, MHC of NJ(46.0) ......... 18.50 39.00 0.82 19.16 22.56 96.56 18.65 96.56 22.56
SBFL SB Fngr Lakes MHC of NY(33.1) ....... 20.00 71.40 0.57 17.61 NM 113.57 24.46 113.57 NM
WAYN Wayne Svgs Bks MHC of OH(47.8) ...... 27.25 67.69 1.12 23.03 23.29 118.32 23.49 118.32 24.33
WCFB Wbstr Cty FSB MHC of IA(45.2) ....... 19.63 41.46 0.93 19.87 21.11 98.79 36.13 98.79 21.11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dividends (4) Financial Characteristics(6)
-------------------------- ---------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ----------- ------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
----- ----- -------- ------ ------ ------ --- --- --- ---
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
Summit Bank
- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Superrange ............................. 0.00 0.00 0.00 154 21.06 0.22 1.11 5.25 0.78 3.69
Range Maximum .......................... 0.00 0.00 0.00 151 19.53 0.23 1.09 5.57 0.75 3.85
Range Midpoint ......................... 0.00 0.00 0.00 148 18.14 0.23 1.07 5.90 0.73 4.02
Range Minimum .......................... 0.00 0.00 0.00 146 16.71 0.24 1.05 6.29 0.70 4.22
All Public Companies .................... 0.35 1.55 30.77 1,443 13.50 0.65 0.95 8.45 0.90 7.96
All Non-MHC State of MA(7)
- --------------------------
Averages ............................... 0.42 1.58 31.54 664 10.36 0.43 1.08 12.14 1.02 11.19
Medians ................................ -- -- -- -- -- -- -- -- -- --
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
Averages ............................... 0.37 1.45 32.08 1,406 23.93 0.59 1.13 4.71 1.07 4.42
Medians ................................ -- -- -- -- -- -- -- -- -- --
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
ALLB Alliance Bank MHC of PA(19.9) ...... 0.00 0.00 0.00 352 30.76 1.38 1.34 4.14 1.34 4.14
BRKL Brookline Bncp MHC of MA(47.0) ..... 0.00 0.00 0.00 1,674 28.19 0.62 1.08 3.82 1.08 3.82
CMSV Commty. Svgs, MHC of FL(48.5) ...... 0.90 2.54 62.94 841 19.29 0.26 0.97 4.82 0.92 4.56
FFFL Fidelity Bcsh MHC of FL(47.7) ...... 0.90 2.99 67.16 1,413 12.81 0.32 0.85 5.70 0.76 5.12
SKBO First Carnegie MHC of PA(45.0) ..... 0.30 1.51 40.00 165 28.03 0.78 0.95 3.81 1.02 4.08
FFSX First FSB MHC Sxld of IA(46.1) ..... 0.48 1.29 28.24 620 14.57 0.36 0.90 5.40 0.91 5.43
GBNK Gaston Fed Bncp MHC of NC(47.0) .... 0.00 0.00 0.00 206 35.44 0.32 1.44 4.07 1.44 4.07
HARS Harris Fin. MHC of PA(24.3) ........ 0.22 0.86 22.92 2,825 26.50 0.66 1.34 4.89 1.22 4.43
JXSB Jcksnville SB, MHC of IL(45.6) ..... 0.30 1.33 40.54 195 22.17 0.86 0.92 4.09 0.74 3.29
LFED Leeds Fed Bksr MHC of MD(36.3) ..... 0.56 2.77 56.00 356 29.96 NA 1.50 4.94 1.50 4.94
NBCP Niagara Bancorp of NY MHC(45.4) .... 0.00 0.00 0.00 3,367 17.83 0.25 0.72 4.02 0.72 4.02
NWSB Northwest Bcrp MHC of PA(30.7) ..... 0.16 0.98 21.62 2,863 23.29 0.69 1.32 5.27 1.32 5.27
PBHC Pathfinder BC MHC of NY(46.1) ...... 0.20 0.88 21.98 234 26.06 1.33 1.26 4.81 1.11 4.25
PBCT Peoples Bank, MHC of CT(40.1) ...... 0.84 2.20 59.15 10,449 20.52 0.66 1.44 6.73 0.97 4.53
PHSB Ppls Home SB, MHC of PA(45.0) ...... 0.24 1.19 28.24 250 22.00 0.36 1.06 5.05 0.98 4.67
PLSK Pulaski SB, MHC of NJ(46.0) ........ 0.30 1.62 36.59 209 19.31 0.73 0.85 4.53 0.85 4.53
SBFL SB Fngr Lakes MHC of NY(33.1) ...... 0.24 1.20 42.11 292 21.54 0.27 0.80 3.50 0.75 3.27
WAYN Wayne Svgs Bks MHC of OH(47.8) ..... 0.56 2.06 50.00 288 19.85 NA 1.02 5.14 0.97 4.92
WCFB Wbstr Cty FSB MHC of IA(45.2) ...... 0.80 4.08 NM 115 36.57 0.12 1.72 4.71 1.72 4.71
</TABLE>
- ------------------
(1) Current stock price of minority stock. Average of High/Low or Bid/Ask price
per share.
(2) EPS (estimated core earnings) is based on reported trailing twelve month
data, adjusted to omit non-operation gains and losses (including the SAIF
assessment) on a tax effected basis. Public MHC data reflects additional
earnings from reinvestment of proceeds of second step conversion.
(3) P/E - Price to Earnings; P/B - Price to Book; P/A - Price to Assets; P/TB -
Price to Tangible Book; and P/CORE - Price to Core Earnings. Ratios are pro
forma assuming a second step conversion to full stock form.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
estimated core earnings (earnings adjusted to reflect second step
conversion).
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
(8) Figures estimated by RP Financial to reflect a second step conversion of
the MHC to full stock form.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the accuracy
or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.29
of the Peer Group companies. Comparatively, as a newly formed MHC, speculation
of a second step conversion is not expected to have a material influence on the
Bank's stock price.
RP Financial also considered the P/B ratios of the most recent MHC
conversions in its valuation analysis. Brookline Bancorp, Niagra Bancorp and
Gaston Federal have been the three publicly-traded MHC offerings completed
during 1998 and, as of May 29, 1998, were trading at an average P/B ratio of
95.3 percent. At the midpoint value of $20,000,000, Summit's pro forma P/B ratio
(fully-converted basis) of 74.38 percent was discounted by 21.9 percent from the
average P/B ratio of those three companies.
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines market
value by applying a valuation P/A ratio (fully-converted basis) to the Bank's
pro forma asset base, conservatively assuming no deposit withdrawals are made to
fund stock purchases. In all likelihood there will be deposit withdrawals, which
results in understating the pro forma P/A ratio which is computed herein. At the
midpoint of the valuation range, Summit's full conversion value equaled 13.49
percent of pro forma assets. Comparatively, the Peer Group companies exhibited
an average P/A ratio (fully-converted basis) of 25.14 percent, which implies a
46.3 percent discount being applied to the Bank's pro forma P/A ratio
(fully-converted basis).
* * * * * * * * * *
We believe that the Bank's pricing discounts relative to the Peer Group are
appropriately reflective of the valuation adjustments discussed above.
Valuation Conclusion
Based on the foregoing, it is our opinion that, as of May 29, 1998, the
estimated aggregate pro forma market value of the shares to be issued
immediately following the conversion, both shares issued publicly as well as to
the MHC, was $20,000,000 at the midpoint, equal to 2,000,000 shares offered at a
per share value of $10.00. Pursuant to conversion guidelines, the 15 percent
offering range indicates a minimum value of $17,000,000, and a maximum value of
$23,000,000. Based on the $10.00 per share offering price determined by the
Board, this valuation range equates to total shares outstanding of 1,700,000 at
the minimum and 2,300,000 at the maximum. In the event the appraised value is
subject to an increase, the aggregate pro forma market value may be increased up
to a
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.6
Public Market Pricing
Summit Bank and the Comparables
As of May 19, 1998
<TABLE>
<CAPTION>
Market
Capitalization Per Share Data
----------------- --------------
Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ ----------------------------------------
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- -------- ------ ------ ----- ------ ----- ------ ------
Summit Bank ($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Superrange................................ 10.00 11.90 0.35 7.51 18.42 133.15 18.74 133.15 28.43
Range Maximum............................. 10.00 10.35 0.39 8.04 16.35 124.34 16.45 124.34 25.53
Range Midpoint............................ 10.00 9.00 0.44 8.66 14.48 115.54 14.43 115.54 22.84
Range Minimum............................. 10.00 7.65 0.50 9.50 12.53 105.29 12.37 105.29 19.98
All Public Companies....................... 22.69 253.13 1.01 13.79 19.80 167.54 20.81 173.22 20.62
Comparable Group Averages
- -------------------------
Averages.................................. 24.10 121.86 0.60 10.02 27.02 224.96 29.37 235.78 27.38
Medians................................... -- -- -- -- 27.38 231.05 28.47 238.19 27.38
Comparable Group
- ----------------
ALLB Alliance Bank MHC of PA(19.9) ....... 35.00 22.75 0.62 8.93 NM NM 42.00 NM NM
BRKL Brookline Bncp MHC of MA(47.0) ...... 16.81 229.88 0.39 8.56 NM 196.38 33.70 196.38 NM
CMSV Commty. Svgs, MHC of FL(48.5) ....... 35.83 87.39 0.95 16.11 NM 219.38 23.72 219.62 NM
FFFL Fidelity Bcsh MHC of FL(47.7) ....... 30.06 96.91 0.92 13.01 28.09 231.05 15.48 238.19 NM
SKBO First Carnegie MHC of PA(45.0)....... 19.88 20.58 0.46 10.74 NM 185.10 31.83 185.10 NM
FFSX First FSB MHC Sxld of IA(46.1) ...... 37.25 48.54 1.17 14.51 NM 256.72 18.51 324.48 NM
GBNK Gaston Fed Bncp MHC of NC(47.0) ..... 16.75 35.39 0.43 8.56 NM 195.68 44.00 195.68 NM
HARS Harris Fin. MHC of PA(24.3) ......... 25.50 208.31 0.45 5.41 NM NM 38.29 NM NM
JXSB Jcksnville SB, MHC of IL(45.6) ...... 22.50 13.05 0.33 9.23 NM 243.77 25.31 243.77 NM
LFED Leeds Fed Bksr MHC of MD(36.3) ...... 20.25 38.13 0.66 9.52 NM 212.71 35.10 212.71 NM
NBCP Niagara Bancorp of NY MHC(45.4) ..... 15.88 214.41 0.58 12.71 27.38 124.94 15.03 124.94 27.38
NWSB Northwest Bcrp MHC of PA(30.7) ...... 16.25 233.22 0.44 4.55 NM NM 31.59 NM NM
PBHC Pathfinder BC MHC of NY(46.1) ....... 22.63 19.96 0.50 8.15 NM 277.67 32.66 327.50 NM
PBCT Peoples Bank, MHC of CT(40.1) ....... 38.13 932.39 0.80 13.18 25.59 289.30 26.71 337.73 NM
PHSB Ppls Home SB, MHC of PA(45.0) ....... 20.25 25.15 0.56 10.33 NM 196.03 25.02 196.03 NM
PLSK Pulaski SB, MHC of NJ(46.0) ......... 18.50 17.61 0.55 10.44 NM 177.20 20.44 177.20 NM
SBFL SB Fngr Lakes MHC of NY(33.1) ....... 20.00 23.64 0.22 6.10 NM 327.87 28.47 327.87 NM
WAYN Wayne Svgs Bks MHC of OH(47.8) ...... 27.25 29.29 0.71 9.74 NM 279.77 26.53 279.77 NM
WCFB Wbstr Cty FSB MHC of IA(45.2) ....... 19.63 18.65 0.65 10.58 NM 185.54 43.58 185.54 NM
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Dividends (4) Financial Characteristics(6)
-------------------------- ---------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ----------- ------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
----- ----- -------- ------ ------ ------ --- --- --- ---
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
Summit Bank
- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Superrange ............................. 0.00 0.00 0.00 141 14.07 0.24 1.02 7.23 0.66 4.68
Range Maximum .......................... 0.00 0.00 0.00 140 13.23 0.25 1.01 7.61 0.64 4.875
Range Midpoint ......................... 0.00 0.00 0.00 139 12.49 0.25 1.00 7.98 0.63 5.06
Range Minimum .......................... 0.00 0.00 0.00 137 11.75 0.25 0.99 8.40 0.62 5.27
All Public Companies .................... 0.35 1.55 30.77 1,443 13.50 0.65 0.95 8.45 0.90 7.96
Comparable Group Averages
- -------------------------
Averages ............................... 0.37 1.45 11.59 1,228 12.37 0.59 0.83 7.16 0.76 6.39
Medians ................................ -- -- -- -- -- -- -- -- -- --
Comparable Group
- ----------------
ALLB Alliance Bank MHC of PA(19.9) ...... 0.00 0.00 0.00 273 10.72 1.38 0.80 7.09 0.80 7.09
BRKL Brookline Bncp MHC of MA(47.0) ..... 0.00 0.00 0.00 1,451 17.16 0.62 0.78 4.56 0.78 4.56
CMSV Commty. Svgs, MHC of FL(48.5) ...... 0.90 2.54 NM 761 10.80 0.26 0.74 6.58 0.68 6.07
FFFL Fidelity Bcsh MHC of FL(47.7) ...... 0.90 2.99 NM 1,321 6.70 0.32 0.66 8.52 0.57 7.32
SKBO First Carnegie MHC of PA(45.0) ..... 0.30 1.51 29.35 144 17.20 0.78 0.64 4.58 0.71 5.13
FFSX First FSB MHC Sxld of IA(46.1) ..... 0.48 1.29 18.84 571 7.21 0.36 0.68 8.30 0.69 8.38
GBNK Gaston Fed Bncp MHC of NC(47.0) .... 0.00 0.00 0.00 171 22.48 0.32 1.13 5.02 1.13 5.02
HARS Harris Fin. MHC of PA(24.3) ........ 0.22 0.86 11.77 2,260 8.12 0.66 0.88 10.93 0.72 8.95
JXSB Jcksnville SB, MHC of IL(45.6) ..... 0.30 1.33 NM 170 10.38 0.86 0.59 5.64 0.38 3.65
LFED Leeds Fed Bksr MHC of MD(36.3) ..... 0.56 2.77 NM 299 16.50 NA 1.18 7.20 1.18 7.20
NBCP Niagara Bancorp of NY MHC(45.4) .... 0.00 0.00 0.00 3,145 12.03 0.25 0.55 4.56 0.55 4.56
NWSB Northwest Bcrp MHC of PA(30.7) ..... 0.16 0.98 11.14 2,409 8.85 0.69 1.95 10.14 0.95 10.14
PBHC Pathfinder BC MHC of NY(46.1) ...... 0.20 0.88 12.46 196 11.76 1.33 0.91 7.74 0.73 6.24
PBCT Peoples Bank, MHC of CT(40.1) ...... 0.84 2.20 NM 9,150 9.23 0.66 1.18 13.44 0.63 7.21
PHSB Ppls Home SB, MHC of PA(45.0) ...... 0.24 1.19 19.29 223 12.76 0.36 0.81 7.30 0.72 6.49
PLSK Pulaski SB, MHC of NJ(46.0) ........ 0.30 1.62 24.63 191 11.54 0.73 0.63 5.86 0.63 5.86
SBFL SB Fngr Lakes MHC of NY(33.1) ...... 0.24 1.20 NM 251 8.68 0.27 0.40 4.39 0.34 3.72
WAYN Wayne Svgs Bks MHC of OH(47.8) ..... 0.56 2.06 NM 255 9.48 NA 0.75 8.03 0.70 7.51
WCFB Wbstr Cty FSB MHC of IA(45.2) ...... 0.80 4.08 NM 95 23.49 0.12 1.46 6.23 1.46 6.23
</TABLE>
- ------------------
(1) Average of high/low or bid/ask price per share.
(2) EPS (core basis) is based on actual trailing twelve month data, adjusted to
omit the impact of non-operation items (including the SAIF assessment) on a
tax effected basis and is shown on a pro forma basis where appropriate.
(3) P/E - Price to Earnings; P/B - Price to Book; P/A - Price to Assets; P/TB -
Price to Tangible Book; and P/CORE - Price to Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
estimated core earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and total assets balances.
(7) Excludes from averages and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the accuracy
or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.31
supermaximum value of $26.450 million without a resolicitation. Based on the
$10.00 per share offering price, the supermaximum value would result in total
shares outstanding of 2,645,000. The Board of Directors has established a public
offering range such that the public ownership of the Holding Company will
constitute a 45 percent ownership interest. Accordingly, the offering to the
public of the minority stock will equal $7,650,000 at the minimum, $9,000,000 at
the midpoint, $10,350,000 at the maximum and $11,902,500 at the supermaximum.
The pro forma valuation calculations relative to the Peer Group (fully-converted
basis) are shown in Table 4.5 and are detailed in Exhibit IV-7 and Exhibit IV-8;
the pro forma valuation calculations relative to the Peer Group based on
reported financials are shown in Table 4.6 and are detailed in Exhibits IV-10
and IV-11.
<PAGE>
EXHIBITS
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
Exhibit
Number Description
- ------- -----------
I-1 Map of Office Locations
I-2 Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 Gap Analysis
I-8 Fixed Rate and Adjustable Rate Loans
I-9 Loan Portfolio Composition
I-10 Loan Originations, Purchases, and Sales
I-11 Contractual Maturity By Loan Type
I-12 Non-Performing Assets
I-13 Deposit Composition
I-14 Time Deposit Rate/Maturity
I-15 Borrowing Activity
II-1 Description of Office Facilities
II-2 Historical Interest Rates
III-1 General Characteristics of Publicly-Traded Institutions
III-2 Financial Analysis of All Publicly-Traded MHCs
IV-1 Stock Prices: As of May 29, 1998
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS (continued)
Exhibit
Number Description
- ------- -----------
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Director and Senior Management Summary Resumes
IV-6 Pro Forma Regulatory Capital Ratios
IV-7 Pro Forma Analysis Sheet: Fully Converted Basis
IV-8 Pro Forma Effect of Conversion Proceeds: Fully Converted Basis
IV-9 Peer Group Core Earnings Analysis
IV-10 Pro Forma Analysis Sheet: Minority Stock Offering
IV-11 Pro Forma Effects: Minority Stock Offering
V-1 Firm Qualifications Statement
<PAGE>
EXHIBIT I-1
Summit Bank
Map of Office Locations
[GRAPHIC OMITTED]
<PAGE>
EXHIBIT I-2
Summit Bank
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
Summit Bank
Key Operating Ratios
Key Operating Ratios and Other Data
<TABLE>
<CAPTION>
At or for the At or for the
Nine Months Ended Years Ended
March 31, June 30,
----------------- ------------------
1998 1997 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Performance Ratios (1):
Return on average assets ........ 1.12% 1.15% 1.13% 0.97%
Return on average retained
earnings ...................... 13.64% 13.73% 13.58% 11.35%
Average interest rate spread
during period ................. 3.71% 3.84% 3.86% 3.99%
Net interest margin (2) ......... 4.15% 4.27% 4.29% 4.34%
Ratio of operating expense to
average assets ................ 3.34% 3.15% 3.24% 3.31%
Ratio of average interest-
earning assets to average
interest-bearing liabilities ... 111.82% 112.48% 112.38% 109.81%
Efficiency ratio (3) ............ 64.85% 62.61% 64.16% 66.22%
Asset Quality Ratios:
Non-accrual loans and other
real estate owned to total
assets ........................ 0.26% 0.69% 0.22% 0.99%
Allowance for loan losses as
a percent of non-accrual loans 163.27% 220.00% 246.11% 52.28%
Allowance for loan losses as
a percent of loans
receivable, net ............... 0.77% 0.84% 0.71% 0.79%
Capital Ratios:
Retained earnings to total assets 7.54% 8.10% 8.29% 8.21%
Average retained earnings to
average assets ................ 8.18% 8.39% 8.33% 8.55%
Other Data:
Number of full-service offices .. 5 4 4 4
Number of deposit accounts ...... 16,306 15,379 15,598 14,830
Number of loans outstanding ..... 1,649 1,500 1,557 1,410
</TABLE>
- -----------
(1) Ratios for the nine month periods have been annualized where applicable.
(2) Net interest income divided by average interest-earning assets.
(3) Non-interest expense divided by the sum of net interest income and
non-interest income.
Source: Summit Bank's prospectus.
<PAGE>
Exhibit I-4
Summit Bank
Investment Portfolio Composition
<TABLE>
<CAPTION>
June 30,
------------------------------------------------
March 31, 1998 1997 1996
---------------------- ---------------------- -----------------------
Amortized Market Amortized Market Amortized Market
Cost Value Cost Value Cost Value
---- ----- ---- ----- ---- -----
(Dollars in Thousands)
Debt securities:
<S> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency securities ............. $ 29,504 $ 29,638 $ 16,823 $ 16,642 $ 11,024 $ 10,809
Other debt securities ............................. 2,503 2,491 1,615 1,613 5,129 5,114
-------- -------- -------- -------- -------- --------
Total debt securities ......................... 32,007 32,129 18,438 18,255 16,153 15,923
Marketable equity securities ........................ 2,701 3,251 3,232 3,696 2,573 2,803
-------- -------- -------- -------- -------- --------
Total debt and equity securities .................. 34,708 35,380 21,670 21,951 18,726 18,726
FHLB stock .......................................... 723 723 538 538 455 455
Certificates of deposit ............................. 1,500 1,500 500 500 -- --
-------- -------- -------- -------- -------- --------
Total investment securities ................... 36,931 37,603 22,708 22,989 19,181 19,181
-------- -------- -------- -------- -------- --------
Mortgage-backed securities:
GNMA .............................................. 325 326 375 368 424 408
FNMA .............................................. 5,965 5,965 980 987 -- --
FHLMC ............................................. 1,010 1,014 1,385 1,390 1,675 1,668
-------- -------- -------- -------- -------- --------
Total mortgage-backed securities .............. 7,300 7,305 2,740 2,745 2,099 2,076
-------- -------- -------- -------- -------- --------
Net unrealized (losses) gains on
available-for-sale securities ..................... 677 286 (23)
-------- -------- --------
Total securities .................................... $ 44,908 $ 44,908 $ 25,734 $ 25,734 $ 21,257 $ 21,257
======== ======== ======== ======== ======== ========
</TABLE>
Source: Summit Bank's prospectus.
<PAGE>
Exhibit I-5
Summit Bank
Yields and Costs
<TABLE>
<CAPTION>
Nine Months Ended March 31,
-----------------------------------------------------------------
At March 31, 1998 1998 1997
-------------------- ------------------------------- -----------------------------
Interest Interest
Average Earned/ Average Earned/
Balance Yield/Rate Balance Paid Yield/Rate Balance Paid Yield/Rate
------- ---------- ------- ---- ---------- ------- ---- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1).......... $ 72,197 8.52% $ 69,670 $4,531 8.67% $62,027 $3,923 8.43%
Mortgage-backed securities.... 7,300 5.90 3,450 171 6.61 1,971 101 6.83
Debt securities (2)........... 33,507 6.82 26,392 1,351 6.83 18,333 904 6.57
Equity securities............. 2,701 2.52 2,682 51 2.54 2,018 58 3.83
FHLB stock.................... 723 6.40 588 28 6.35 468 22 6.27
Short-term investments........ 6,400 5.72 4,373 177 5.40 3,333 139 5.56
-------- -------- ------ ------- ------
Total interest-earning assets 122,828 7.61 107,155 6,309 7.85 88,150 5,147 7.79
------ ------- ------
Non-interest-earning assets.... 8,376 6,941 5,406
-------- -------- -------
Total assets................. $131,204 $114,096 $93,556
======== ======== =======
Interest-bearing liabilities:
Savings deposits (3).......... $ 22,480 2.49 $ 21,550 409 2.53 $20,406 386 2.52
Money market deposits......... 8,659 2.75 8,806 182 2.76 7,700 169 2.93
NOW accounts.................. 16,729 1.43 12,249 123 1.34 10,191 99 1.30
Certificate accounts.......... 49,787 5.69 47,577 2,020 5.66 38,071 1,584 5.55
FHLB borrowings............... 12,404 5.27 5,648 238 5.62 2,003 86 5.72
-------- -------- ------ ------- ------
Total interest-bearing
liabilities............... 110,059 4.11 95,830 2,972 4.14 78,371 2,324 3.95
------ ------- ------
Demand deposits................ 10,563 7,956 6,463
Other non-interest bearing
liabilities................... 692 972 868
Retained earnings.............. 9,870 9,338 7,854
-------- -------- -------
Total liabilities and
retained earnings........... $131,204 $114,096 $93,556
======== ======== =======
Net interest income............ $3,337 $2,823
====== ======
Net interest spread............ 3.50% 3.71% 3.84%
==== ==== ====
Net earning assets............. $ 12,804 $ 11,325 $ 9,779
======== ======== =======
Net yield on average
interest-earning assets..... 3.93% 4.15% 4.27%
==== ==== ====
Average interest-earning assets
to average interest-bearing
liabilities................... 111.63% 111.82% 112.48%
====== ====== ======
</TABLE>
- -----------
(1) Calculated net of deferred loan fees, loan discounts, loans in process and
loss reserves.
(2) Debt securities include certificates of deposit.
(3) Savings deposits include mortgagors' escrow accounts.
Source: Summit Bank's prospectus.
<PAGE>
Exhibit I-5 (continued)
Summit Bank
Yields and Costs
<TABLE>
<CAPTION>
Years Ended June 30,
-----------------------------------------------------------
1997 1996
---------------------------- ----------------------------
Interest Interest
Average Earned/ Average Earned/
Balance Paid Yield/Rate Balance Paid Yield/Rate
------- ---- ---------- ------- ---- ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1).......... $63,009 $5,343 8.48% $51,785 $4,540 8.77%
Mortgage-backed securities.... 2,151 145 6.74 2,007 140 6.98
Debt securities (2)........... 18,367 1,222 6.65 17,383 1,106 6.36
Equity securities............. 2,234 86 3.85 2,066 66 3.19
FHLB stock.................... 489 31 6.34 452 29 6.42
Short-term investments........ 3,792 210 5.54 3,615 221 6.11
------- ------ ------- ------
Total interest-earning
assets..................... 90,042 7,037 7.82 77,308 6,102 7.89
------ ------
Non-interest earning assets.... 5,555 5,252
------- -------
Total assets................. $95,597 $82,560
======= =======
Interest-bearing liabilities:
Savings deposits (3).......... $20,637 521 2.52 $19,847 503 2.53
Money market deposits......... 7,854 225 2.86 8,272 229 2.77
NOW accounts.................. 10,429 135 1.29 9,900 154 1.56
Certificate accounts.......... 39,042 2,169 5.56 32,017 1,838 5.74
FHLB advances................. 2,161 124 5.74 365 22 6.03
------- ------ ------- ------
Total interest-bearing
liabilities............... 80,123 3,174 3.96 70,401 2,746 3.90
------ ------
Demand deposits................ 6,638 4,825
Other non-interest bearing
liabilities.................. 870 274
Retained earnings.............. 7,966 7,060
------- -------
Total liabilities and
retained earnings........... $95,597 $82,560
======= =======
Net interest income............ $3,863 $3,356
====== ======
Net interest spread............ 3.86% 3.99%
==== ====
Net earning assets............. $ 9,919 $ 6,907
======= =======
Net yield on average
interest-earning assets...... 4.29% 4.34%
==== ====
Average interest-earning assets
to average interest-bearing
liabilities................... 112.38% 109.81%
====== ======
</TABLE>
- ----------
(1) Calculated net of deferred loan fees, loan discounts, loans in process and
loss reserves.
(2) Debt securities include certificates of deposit.
(3) Savings deposits include mortgagors' escrow accounts.
Source: Summit Bank's prospectus.
<PAGE>
Exhibit I-6
Summit Bank
Loan Loss Allowance Activity
Nine Months
Ended March 31, Years Ended June 30,
---------------- --------------------
1998 1997 1997 1996
---- ---- ---- ----
(Dollars in Thousands)
Balance at beginning of period ....... $ 475 $ 470 $ 470 $ 445
Charge-offs:
One- to four-family ................ -- -- -- --
Commercial real estate ............. -- -- -- --
Construction ....................... -- -- -- --
Consumer ........................... 11 20 20 --
Commercial business ................ -- -- 74 88
----- ----- ----- -----
11 20 94 88
----- ----- ----- -----
Recoveries:
One- to four-family ................ -- 20 20 --
Commercial real estate ............. -- -- -- --
Construction ....................... -- -- -- --
Consumer ........................... 6 7 8 17
Commercial business ................ 15 27 36 3
----- ----- ----- -----
21 54 64 20
----- ----- ----- -----
Net charge-offs (recoveries) ......... (10) (34) 30 68
Additions charged to earnings ........ 75 35 35 93
----- ----- ----- -----
Balance at end of period ............. $ 560 $ 539 $ 475 $ 470
===== ===== ===== =====
Ratio of net charge-offs
(recoveries)during the
period to average loans
outstanding during the period ...... (0.01)% (0.05)% 0.05% 0.13%
===== ===== ===== =====
Ratio of net charge-offs
(recoveries) during the
period to average non-
performing assets .................. (3.62)% (4.97)% 5.35% 7.01%
===== ===== ===== =====
Source: Summit Bank's prospectus.
<PAGE>
Exhibit I-7
Summit Bank
Gap Analysis
<TABLE>
<CAPTION>
Amounts maturing or repricing at March 31, 1998
-------------------------------------------------------------------------------------------------
Less
Than Three 3-6 6 Months to 1-3 3-5 5-10 Over 10
Months Months 1 Year Years Years Years Years Total
------ ------ ------ ----- ----- ----- ----- -----
(Dollars in Thousands)
Interest-earning assets(1):
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans receivable (2) .......... $ 18,261 $ 6,803 $ 15,657 $ 21,849 $ 5,367 $ 4,577 $ -- $ 72,514
Short-term investments ........ 6,400 -- -- -- -- -- -- 6,400
Mortgage-backed securities .... 2,896 1,868 580 648 676 632 -- 7,300
Debt securities and
certificates of deposit ...... -- 500 1,000 500 3,000 26,507 2,000 33,507
Equity securities ............. -- -- -- -- -- -- 2,701 2,701
FHLB stock .................... -- -- -- -- -- -- 723 723
-------- -------- -------- -------- -------- -------- -------- --------
Total interest-earning assets 27,557 9,171 17,237 22,996 9,043 31,716 5,424 123,145
-------- -------- -------- -------- -------- -------- -------- --------
Interest-bearing liabilities:
Savings deposits (3)(4) ....... 2,810 2,810 2,810 2,810 -- -- 11,240 22,480
Money market deposits (3) ..... 1,082 1,082 1,082 1,082 -- -- 4,331 8,659
NOW deposits (5) .............. 3,137 3,137 3,137 3,137 -- -- 4,181 16,729
Certificate accounts .......... 13,395 14,619 14,258 7,443 72 -- -- 49,787
FHLB advances ................. 141 141 2,118 519 -- 9,000 485 12,404
-------- -------- -------- -------- -------- -------- -------- --------
Total interest-bearing
liabilities ................ $ 20,565 $ 21,789 $ 23,405 $ 14,991 $ 72 $ 9,000 $ 20,237 110,059
-------- -------- -------- -------- -------- -------- -------- --------
Interest sensitivity gap (6) .... $ 6,992 $(12,618) $ (6,188) $ 8,006 $ 8,971 $ 22,716 $(14,813)
======== ======== ======== ======== ======== ======== ========
Cumulative interest
sensitivity gap ............... $ 6,992 $ (5,626) $(11,794) $ (3,788) $ 5,183 $ 27,899 $ 13,086
======== ======== ======== ======== ======== ======== ========
Cumulative interest sensitivity
gap as a percentage of
total assets .................. 5.33% (4.29)% (8.99)% (2.89)% 3.95% 21.26% 9.97%
Cumulative interest sensitivity
gap as a percentage of
total interest-earning assets . 5.68% (4.57)% (9.57)% (3.08)% 4.21% 22.66% 10.66%
Cumulative interest-earning
assets as a percentage of
cumulative interest-bearing
liabilities ................... 134.00% 86.72% 82.06% 95.31% 106.41% 131.06% 111.89%
</TABLE>
- ----------
(1) Interest-earning assets are included in the period in which the balances
are expected to be redeployed and/or repriced as a result of anticipated
prepayments, scheduled rate adjustments and contractual maturities.
(2) For the purposes of the gap analysis, the allowance for loan losses,
deferred loan fees, unearned income, and non-accrual loans have been
excluded.
(3) 50% of regular savings and money market account balances is included in the
over 10 year period; the remaining 50% of such balances is spread evenly
within the four intervals up to and including the one- to three-year
period.
(4) Includes mortgagors' escrow payments.
(5) 25% of NOW account balances are included in the over 10 year period; the
remaining balances are spread evenly within the four intervals up to and
including the one- to three-year period.
(6) Interest sensitivity gap represents the difference between interest-earning
assets and interest-bearing liabilities.
Source: Summit Bank's prospectus.
<PAGE>
Exhibit I-8
Summit Bank
Fixed Rate and Adjustable Rate Loans
Due After March 31, 1999
--------------------------------
Fixed Adjustable Total
----- ---------- -----
(In Thousands)
Real estate loans:
One- to four-family ................... $12,667 $14,660 $27,328
Commercial ............................ -- 7,686 7,686
Construction .......................... -- 1,206 1,206
------- ------- -------
Total real estate loans ............. 12,667 23,553 36,220
Other loans:
Consumer loans ........................ 1,139 8 1,147
Commercial business loans ............. 557 239 796
------- ------- -------
Total loans receivable .............. $14,363 $23,800 $38,163
======= ======= =======
Source: Summit Bank's prospectus.
<PAGE>
Exhibit I-9
Summit Bank
Loan Portfolio Composition
<TABLE>
<CAPTION>
June 30,
March 31, ----------------------------------------
1998 1997 1996
------------------ ------------------ ------------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollars in Thousands)
Real estate loans:
<S> <C> <C> <C> <C> <C> <C>
One- to four-family.............. $45,732 62.77% $47,196 69.91% $42,774 70.98%
Commercial....................... 12,148 16.67 8,342 12.36 5,860 9.72
Construction..................... 3,862 5.30 2,880 4.27 3,154 5.23
------- ------ ------- ------ ------- ------
Total real estate loans...... 61,742 84.74 58,418 86.54 51,788 85.93
------- ------ ------- ------ ------- ------
Other loans:
Consumer loans:
Collateral.................... 886 1.22 596 0.88 386 0.64
Home equity................... 5,209 7.15 4,574 6.78 4,271 7.09
Other......................... 1,495 2.05 1,362 2.02 1,128 1.87
------- ------ ------- ------ ------- ------
Total consumer loans......... 7,590 10.42 6,532 9.68 5,785 9.60
Commercial business loans........ 3,525 4.84 2,554 3.78 2,695 4.47
------- ------ ------- ------ ------- ------
Total other loans............ 11,115 15.26 9,086 13.46 8,480 14.07
------- ------ ------- ------ ------- ------
Total gross loans............ 72,857 100.00% 67,504 100.00% 60,268 100.00%
====== ====== ======
Less:
Net deferred loan fees........ (103) (99) (100)
Deferred (income) premium..... 3 4 (31)
Allowance for loan losses..... (560) (475) (470)
------- ------- -------
Total loans receivable, net.. $72,197 $66,934 $59,667
======= ======= =======
</TABLE>
Source: Summit Bank's prospectus.
<PAGE>
Exhibit I-10
Summit Bank
Loan Originations, Purchases, and Sales
Nine Months
Ended March 31, Years Ended June 30,
--------------- --------------------
1998 1997 1997 1996
---- ---- ---- ----
(In Thousands)
Originations:
Real estate:
One- to four-family ............. $10,175 $ 6,319 $ 8,701 $10,260
Commercial ...................... 3,296 1,655 4,132 1,611
Construction .................... 2,837 3,732 4,227 3,352
Non-real estate:
Consumer ........................ 2,816 2,932 4,057 3,095
Commercial business ............. 2,314 1,395 2,658 1,729
------- ------- ------- -------
Total loans originated ............ 21,438 16,033 23,775 20,047
------- ------- ------- -------
Purchases:
Real estate:
One- to four-family ............. 2,490 2,670 2,670 2,826
Non-real estate:
Commercial business ............. -- -- -- 500
------- ------- ------- -------
Total loans purchased ............. 2,490 2,670 2,670 3,326
------- ------- ------- -------
Sales and Repayments:
Real estate:
One- to four-family ............. 5,379 1,585 2,219 361(1)
------- ------- ------- -------
Principal repayments .............. 13,196 12,671 16,990 11,109
------- ------- ------- -------
Total reductions .................. 18,575 14,256 19,209 11,470
------- ------- ------- -------
Net increase - gross loans ........ $ 5,353 $ 4,447 $ 7,236 $11,903
======= ======= ======= =======
- ----------
(1) Consists of loans secured by leases on residential property.
Source: Summit Bank's prospectus.
<PAGE>
Exhibit I-11
Summit Bank
Contractual Maturity By Loan Type
<TABLE>
<CAPTION>
One Three Five Ten
Within Through Through Through Through Beyond
One Three Five Ten Twenty Twenty
Year Years Years Years Years Years Total
---- ----- ----- ----- ----- ----- -----
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
One- to four-family.............. $18,405 $10,404 $6,545 $2,789 $3,285 $4,305 $45,732
Commercial....................... 4,461 5,576 1,444 149 518 -- 12,148
Construction..................... 2,657 565 476 39 126 -- 3,862
------- ------- ------ ------ ------ ------ -------
Total real estate loans........ 25,523 16,544 8,464 2,977 3,929 4,305 61,742
Other loans
Consumer......................... 6,442 756 227 165 -- -- 7,589
Commercial business.............. 2,729 730 59 7 -- -- 3,525
------- ------- ------ ------ ------ ------ -------
Total loans.................... $34,694 $18,029 $8,750 $3,149 $3,929 $4,305 72,857
======= ======= ====== ====== ====== ====== -------
Less:
Deferred loan origination fees... (103)
Deferred premiums................ 3
Allowance for loan losses........ (560)
-------
Net loans.................... $72,197
=======
</TABLE>
Source: Summit Bank's prospectus.
<PAGE>
Exhibit I-12
Summit Bank
Non-Performing Assets
<TABLE>
<CAPTION>
June 30,
March 31, ----------------
1998 1997 1996
--------- ------ ------
(Dollars in Thousands)
<S> <C> <C> <C>
Non-accruing loans:
One- to four-family real estate............... $ 315 $ 193 $ 424
Commercial real estate........................ -- -- --
Construction.................................. -- -- --
Consumer...................................... -- -- 25
Commercial business........................... 28 -- 449
----- ----- -----
Total....................................... 343 193 898
----- ----- -----
Accruing loans delinquent more than 90 days:
One- to four-family real estate............... 172 334 29
Commercial real estate........................ -- -- --
Construction.................................. -- -- --
Consumer...................................... 5 -- 17
Commercial business........................... 146 2 --
----- ----- -----
Total....................................... 323 336 46
----- ----- -----
Foreclosed assets:
One- to four-family real estate............... -- -- --
Commercial real estate........................ -- -- --
Construction.................................. -- 37 --
Consumer...................................... -- -- --
Commercial business........................... -- -- --
----- ----- -----
Total....................................... -- 37 --
----- ----- -----
Total non-performing assets and
delinquent loans.............................. $ 666 $ 566 $ 944
===== ===== =====
Total as a percentage of total assets........... 0.51% 0.54% 1.04%
===== ===== =====
</TABLE>
Source: Summit Bank's prospectus.
<PAGE>
Exhibit I-13
Summit Bank
Deposit Composition
<TABLE>
<CAPTION>
For the Nine Months
Ended March 31, For the Year Ended June 30,
--------------------------------- ---------------------------------
1998 1997
--------------------------------- ---------------------------------
Percent Percent
of Total Weighted of Total Weighted
Average Average Average Average Average Average
Balance Deposits Rate Balance Deposits Rate
------- -------- ---- ------- -------- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Money market accounts............. $ 8,806 8.97% 2.76% $ 7,854 9.28% 2.86%
Savings accounts.................. 21,550 21.96 2.53 20,637 24.39 2.52
NOW accounts...................... 12,249 12.48 1.34 10,429 12.33 1.29
Non-interest-bearing accounts..... 7,956 8.11 -- 6,638 7.85 --
------- ------ ------- ------
Total non-certificate accounts. 50,561 51.52 1.88 45,558 53.85 1.93
------- ------ ------- ------
Certificates of deposit:
Less than six months.............. 8,289 8.45 5.44 6,468 7.65 5.10
Over six through 12 months........ 20,804 21.20 5.74 15,347 18.14 5.52
Over 12 through 24 months......... 13,985 14.25 5.50 12,185 14.40 5.65
Over 24 months.................... 4,499 4.58 6.16 5,042 5.96 6.01
------- ------ ------- ------
Total certificate accounts.... 47,577 48.48 5.66 39,042 46.15 5.56
------- ------ ------- ------
Total average deposits.... $98,138 100.00% 3.71% $84,600 100.00% 3.61%
======= ====== ======= ======
Certificates over $100,000.... $ 7,798 5.76% $ 6,198 5.73%
======= =======
</TABLE>
For the Year Ended June 30,
1996
---------------------------------
Percent
of Total Weighted
Average Average Average
Balance Deposits Rate
------- -------- ----
Money market accounts............. $ 8,272 11.05% 2.77%
Savings accounts.................. 19,847 26.51 2.53
NOW accounts...................... 9,900 13.22 1.56
Non-interest-bearing accounts..... 4,825 6.45 --
------- ------
Total non-certificate accounts. 42,844 57.23 2.07
Certificates of deposit:
Less than six months.............. 4,828 6.45 5.28
Over six through 12 months........ 12,525 16.73 5.93
Over 12 through 24 months......... 9,337 12.47 5.73
Over 24 months.................... 5,327 7.12 5.73
------- ------
Total certificate accounts.... 32,017 42.77 5.74
------- ------
Total average deposits.... $74,861 100.00% 3.64
======= ======
Certificates over $100,000.... $ 3,829 5.98%
=======
Source: Summit Bank's prospectus.
<PAGE>
Exhibit I-14
Summit Bank
Time Deposit Rate/Maturity
<TABLE>
<CAPTION>
Maturity
-------------------------------------------------------------
Over Over
3 Months 3 to 6 6 to 12 Over
or Less Months Months 12 Months Total
------- ------ ------ --------- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Certificates of deposit less than $100,000....... $11,106 $12,386 $12,176 $6,353 $42,021
Weighted average rate....................... 5.73% 5.72% 5.62% 5.55% 5.67%
Certificates of deposit of $100,000 or more...... 2,290 2,233 2,080 1,163 7,766
Weighted average rate....................... 5.83% 5.76% 5.68% 5.92% 5.78%
Total certificates of deposit.................... $13,396 $14,619 $14,256 $7,516 $49,787
======= ======= ======= ====== =======
</TABLE>
Source: Summit Bank's prospectus.
<PAGE>
Exhibit I-15
Summit Bank
Borrowing Activity
<TABLE>
<CAPTION>
Nine Months
Ended March 31, Years Ended June 30,
------------------ --------------------
1998 1997 1997 1996
---- ---- ---- ----
(In Thousands)
<S> <C> <C> <C> <C>
Maximum balance.................................. $14,451 $2,641 $3,401 $833
Average balance.................................. $ 5,648 $2,003 $2,161 $365
</TABLE>
The following table sets forth certain information as to the Bank's FHLB
advances at the dates indicated.
<TABLE>
<CAPTION>
June 30,
March 31, ----------------
1998 1997 1996
--------- ------ ------
(Dollars in Thousands)
<S> <C> <C> <C>
FHLB advances.................................... $12,404 $2,622 $ 369
Weighted average interest rate of FHLB advances.. 5.27% 5.69% 5.76%
</TABLE>
Source: Summit Bank's prospectus.
<PAGE>
Exhibit II-1
Summit Bank
Description of Office Facilities
<TABLE>
<CAPTION>
Net Book Value
of Property or
Leasehold
Year Owned/ Date of Lease Improvements
Location Description Opened Leased Expiration at March 31, 1998
- --------------------------- ------------- ------ ------ ------------- -----------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
81 Main Street Main Office 1980 Owned -- $625
Medway, MA
1098 Main Street Branch Office 1962 Owned -- 128
Millis, MA
238 Main Street Branch Office 1990 Leased 1/30/99 --
Medfield, MA
1000 Franklin Village Drive Branch Office 1995 Leased 9/30/08 10
Franklin, MA
281A East Central Street Branch Office 1997 Leased 5/30/02 185
Franklin, MA
</TABLE>
Source: Summit Bank's prospectus.
<PAGE>
EXHIBIT II-2
Historical Interest Rates
<PAGE>
Exhibit II-2
Historical Interest Rates(1)
Prime 90 Day One Year 30 Year
Year/Qtr. Ended Rate T-Bill T-Bill T-Bond
- --------------- ----- ------ -------- -------
1991: Quarter 1 8.75% 5.92% 6.24% 8.26%
Quarter 2 8.50% 5.72% 6.35% 8.43%
Quarter 3 8.00% 5.22% 5.38% 7.80%
Quarter 4 6.50% 3.95% 4.10% 7.47%
1992: Quarter 1 6.50% 4.15% 4.53% 7.97%
Quarter 2 6.50% 3.65% 4.06% 7.79%
Quarter 3 6.00% 2.75% 3.06% 7.38%
Quarter 4 6.00% 3.15% 3.59% 7.40%
1993: Quarter 1 6.00% 2.95% 3.18% 6.93%
Quarter 2 6.00% 3.09% 3.45% 6.67%
Quarter 3 6.00% 2.97% 3.36% 6.03%
Quarter 4 6.00% 3.06% 3.59% 6.34%
1994: Quarter 1 6.25% 3.56% 4.44% 7.09%
Quarter 2 7.25% 4.22% 5.49% 7.61%
Quarter 3 7.75% 4.79% 5.94% 7.82%
Quarter 4 8.50% 5.71% 7.21% 7.88%
1995: Quarter 1 9.00% 5.86% 6.47% 7.43%
Quarter 2 9.00% 5.57% 5.63% 6.63%
Quarter 3 8.75% 5.42% 5.68% 6.51%
Quarter 4 8.50% 5.09% 5.14% 5.96%
1996: Quarter 1 8.25% 5.14% 5.38% 6.67%
Quarter 2 8.25% 5.16% 5.68% 6.87%
Quarter 3 8.25% 5.03% 5.69% 6.92%
Quarter 4 8.25% 5.18% 5.49% 6.64%
1997: Quarter 1 8.50% 5.32% 6.00% 7.10%
Quarter 2 8.50% 5.17% 5.66% 6.78%
Quarter 3 8.50% 5.10% 5.44% 6.40%
Quarter 4 8.50% 5.34% 5.48% 5.92%
1998: Quarter 1 8.50% 5.12% 5.39% 5.93%
May 29, 1998 8.50% 5.01% 5.42% 5.80%
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
June 8, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
California Companies
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 54,520 M 371 12-31 10/72 76.25 8,367
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 39,669 M 249 12-31 05/59 108.00 6,177
GSB Golden State Bancorp of CA NYSE California Div. 16,029 D 178 06-30 10/83 38.31 1,966
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 5,872 M 85 12-31 01/71 33.13 931
BVCC Bay View Capital Corp. of CA OTC San Francisco CA M.B. 5,341 M 37 12-31 05/86 32.13 650
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 4,220 M 37 12-31 / 12.94 251
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,067 M 24 12-31 12/83 49.06 520
WES Westcorp Inc. of Orange CA NYSE California Div. 3,729 D 26 12-31 05/86 12.13 319
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,812 M 23 03-31 03/96 19.56 334
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 1,066 M 19 06-30 06/95 17.75 112
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 1,047 M 6 12-31 / 19.13 61
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 1,034 M 14 12-31 04/94 20.19 149
ITLA ITLA Capital Corp of CA (3) OTC Los Angeles CA R.E. 1,011 M 6 12-31 10/95 22.63 174
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 860 M 8 06-30 12/93 22.13 103
PROV Provident Fin. Holdings of CA OTC Southern CA M.B. 765 M 10 06-30 06/96 22.75 106
HBNK Highland Bancorp of CA OTC Los Angeles CA R.E. 556 M 7 12-31 / 42.25 98
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 403 M 7 12-31 02/95 21.75 69
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 401 M 8 06-30 06/95 17.75 42
LFCO Life Financial Corp of CA OTC Southern CA Thrift 387 M 5 12-31 / 19.50 128
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 128 M 3 12-31 01/96 12.00 10
Florida Companies
- -----------------
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 3,527 M 60 12-31 11/83 13.75 454
BKUNA BankUnited Fin. Corp. of FL OTC Miami FL Thrift 3,327 M 16 09-30 12/85 18.03 279
OCN Ocwen Financial Corp. of FL NYSE Southeast FL Div. 3,069 D 1 12-31 / 24.38 1,480
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,821 D 47 09-30 09/93 43.81 222
FFFL Fidelity Bcsh MHC of FL (47.7) OTC Southeast FL Thrift 1,321 M 20 12-31 01/94 30.06 204
HARB Harbor Florida Bancshrs of FL OTC Eastern FL Thrift 1,284 M 23 09-30 03/98 12.38 380
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 761 M 21 12-31 10/94 35.38 180
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
June 8, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Florida Companies (continued)
- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 409 M 9 12-31 01/94 20.03 75
Mid-Atlantic Companies
- ----------------------
DME Dime Bancorp, Inc. of NY (3) NYSE NY,NJ,FL M.B. 22,024 M 91 12-31 08/86 29.19 3,335
SVRN Sovereign Bancorp, Inc. of PA OTC PA,NJ,DE M.B. 18,096 M 150 12-31 08/86 17.69 2,351
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,228 M 74 12-31 01/94 41.19 3,479
ASFC Astoria Financial Corp. of NY OTC New York City NY Thrift 10,895 M 61 12-31 11/93 55.03 1,451
LISB Long Island Bancorp, Inc of NY OTC Long Island NY M.B. 6,296 M 35 09-30 04/94 61.78 1,479
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY,MA,VT Thrift 4,089 M 108 12-31 04/92 52.00 668
ICBC Independence Comm Bnk Cp of NY OTC New York City Thrift 4,072 P 34 March 03/98 17.38 1,224
ROSE T R Financial Corp. of NY (3) OTC New York City NY Thrift 4,006 M 15 12-31 06/93 44.75 784
RSLN Roslyn Bancorp, Inc. of NY (3) OTC Long Island NY M.B. 3,706 M 8 12-31 01/97 23.53 1,008
NBCP Niagara Bancorp of NY MHC(45.4 (3) OTC Northern NY Thrift 3,145 P 15 12/31 04/98 15.88 473
SIB Staten Island Bancorp of NY (3) NYSE New York City NY Thrift 2,671 M 16 12-31 12/97 22.44 1,013
NWSB Northwest Bcrp MHC of PA (30.7 OTC Northwest PA Thrift 2,409 M 67 06-30 11/94 16.25 761
CMSB Commonwealth Bancorp Inc of PA OTC Philadelphia PA M.B. 2,390 M 56 12-31 06/96 23.63 384
HARS Harris Fin. MHC of PA (24.3) OTC Harrisburg PA M.B. 2,260 M 33 12-31 01/94 25.50 866
RELY Reliance Bancorp, Inc. of NY OTC New York City NY Thrift 2,180 M 30 06-30 03/94 38.19 368
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 2,018 M 33 12-31 09/93 26.50 234
QCSB Queens County Bancorp of NY (3) OTC New York City NY Thrift 1,622 M 11 12-31 11/93 44.00 657
DIME Dime Community Bancorp of NY (3) OTC New York City NY Thrift 1,577 M 15 06-30 06/96 29.00 361
JSB JSB Financial, Inc. of NY (3) NYSE New York City NY Thrift 1,531 S 13 12-31 06/90 57.84 572
OCFC Ocean Fin. Corp. of NJ OTC Eastern NJ Thrift 1,518 M 10 12-31 07/96 19.25 299
WSFS WSFS Financial Corp. of DE (3) OTC Wilmington Div. 1,515 D 16 12-31 11/86 21.25 265
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,469 M 18 06-30 07/94 17.50 169
RCBK Richmond County Fin Corp of NY OTC New York City Thrift 1,464 M 13 June 02/98 19.00 502
FSLA First Source Bancorp of NJ OTC Eastern NJ Thrift 1,192 P 17 12-31 04/98 10.13 322
MFSL Maryland Fed. Bancorp of MD OTC Southern MD Thrift 1,192 M 27 02-28 06/87 39.00 254
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,182 D 22 06-30 02/84 22.19 198
FFIC Flushing Fin. Corp. of NY (3) OTC New York City NY Thrift 1,078 M 7 12-31 11/95 27.13 212
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 1,055 M 29 06-30 07/87 31.75 164
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
June 8, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ESBF ESB Financial Corp of PA OTC Western PA Thrift 946 M 11 12-31 06/90 18.75 108
PSBK Progressive Bank, Inc. of NY (3) OTC Southeast NY Thrift 896 M 17 12-31 08/84 41.13 159
TSBS Peoples Bancorp Inc of NJ (3) OTC Central NJ Thrift 889 M 14 12-31 04/98 10.06 365
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 818 M 13 12-31 03/96 20.38 155
MBB MSB Bancorp of Middletown NY (3) AMEX Southeastern NY Thrift 765 D 16 12-31 09/92 36.00 102
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 752 M 10 09-30 10/94 18.75 206
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 671 M 16 12-31 10/95 23.00 104
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 669 M 20 12-31 12/88 47.38 113
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 665 M 7 12-31 06/95 20.25 132
THRD TF Financial Corp. of PA OTC PA, NJ Thrift 639 M 14 12-31 07/94 26.38 84
FSNJ Bayonne Banchsares of NJ OTC Northern NJ Thrift 611 D 4 03-31 08/97 16.25 147
FSPG First Home Bancorp of NJ OTC NJ,DE Thrift 546 M 10 12-31 04/87 31.13 84
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 540 M 4 09-30 09/86 27.63 86
AHCI Ambanc Holding Co., Inc. of NY (3) OTC East-Central NY Thrift 520 M 12 12-31 12/95 19.19 82
PFNC Progress Financial Corp. of PA OTC Southeastern PA Thrift 485 M 10 12-31 07/83 19.50 82
LVSB Lakeview Financial of NJ OTC Northern NJ Thrift 473 D 8 07-31 12/93 23.50 91
NEP Northeast PA Fin. Corp of PA AMEX Northeast PA Thrift 437 P 10 DEC 04/98 14.88 96
RARB Raritan Bancorp of Raritan NJ (3) OTC Central NJ Thrift 419 M 6 12-31 03/87 29.00 69
CNY Carver Bancorp, Inc. of NY AMEX New York, NY Thrift 416 D 7 03-31 10/94 13.63 32
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 403 M 4 12-31 04/93 43.50 90
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 403 M 8 09-30 06/88 24.88 49
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 385 M 5 09-30 01/95 19.00 46
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 381 M 10 12-31 11/89 28.50 81
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 368 M 11 12-31 01/95 37.75 90
HARL Harleysville SB of PA OTC Southeastern PA Thrift 368 M 4 09-30 08/87 32.75 55
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 355 M 6 12-31 01/96 20.63 51
WSBI Warwick Community Bncrp of NY (3) OTC Southeast NY Thrift 350 P 4 05-31 12/97 17.00 112
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 344 M 7 06-30 03/87 32.19 70
PHFC Pittsburgh Home Fin Corp of PA OTC Pittsburgh PA Thrift 338 M 9 09-30 04/96 17.75 35
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 335 M 4 09-30 09/93 31.00 38
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 332 D 4 09-30 04/96 18.38 55
FBER 1st Bergen Bancorp of NJ OTC Northern NJ Thrift 316 M 4 12-31 04/96 19.25 53
FIBC Financial Bancorp, Inc. of NY OTC New York City NY Thrift 310 M 5 09-30 08/94 27.38 47
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
June 8, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LFED Leeds Fed Bksr MHC of MD (36.3) OTC Baltimore MD Thrift 299 M 1 06-30 05/94 20.25 105
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 296 M 4 09-30 04/96 17.75 79
WVFC WVS Financial Corp. of PA OTC Pittsburgh PA Thrift 292 D 5 06-30 11/93 18.75 68
ALLB Alliance Bank MHC of PA (19.9) OTC Southeast PA Thrift 273 M 7 12-31 03/95 35.00 115
WYNE Wayne Bancorp, Inc. of NJ OTC Northern NJ Thrift 270 D 5 12-31 06/96 31.63 64
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 266 D 5 12-31 / 7.13 31
SKAN Skaneateles Bancorp Inc of NY (3) OTC Northwest NY Thrift 258 M 9 12-31 06/86 17.25 25
IFSB Independence FSB of DC OTC Washington DC Ret. 252 S 2 12-31 06/85 17.00 22
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 251 M 5 12-31 11/94 20.00 71
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 231 M 9 03-31 08/94 23.50 40
ESBK Elmira Svgs Bank (The) of NY (3) OTC NY,PA Thrift 230 M 6 12-31 03/85 29.00 22
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 223 M 9 12-31 07/97 20.25 56
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 217 M 6 06-30 02/87 20.50 45
PBHC Pathfinder BC MHC of NY (46.1) (3) OTC Upstate NY Thrift 196 M 5 12-31 11/95 22.63 64
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 196 M 3 06-30 12/95 17.50 53
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 191 M 6 12-31 04/97 18.50 39
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 175 M 4 12-31 06/95 22.00 27
PRBC Prestige Bancorp of PA OTC Southwestern PA Thrift 161 M 4 12-31 06/96 21.25 22
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 160 D 5 09-30 10/96 20.25 28
SKBO First Carnegie MHC of PA(45.0) OTC Western PA Thrift 144 D 3 03-31 04/97 19.88 46
CFKY Columbia Financial of KY *** NorthCentral KY Thrift 127 P 5 12-31 04/98 15.50 41
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 126 D 1 03-31 10/95 20.13 30
GOSB GSB Financial Corp. of NY (3) OTC Southeast NY Thrift 119 M 2 09-30 07/97 17.75 40
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 111 M 2 06-30 01/97 18.13 19
USAB USABancshares, Inc of PA (3) OTC Philadelphia PA Thrift 103 M 1 12-31 / 14.00 21
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 101 D 5 09-30 04/96 16.75 23
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 73 M 2 09-30 07/93 10.50 8
PWBK Pennwood Bancorp, Inc. of PA OTC Pittsburgh PA Thrift 46 M 3 06-30 07/96 14.75 11
Mid-West Companies
- ------------------
COFI Charter One Financial of OH OTC OH,MI,NY Div. 19,457 M 221 12-31 01/88 34.25 4,389
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
June 8, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK,IA M.B. 8,529 M 108 06-30 12/84 33.31 1,343
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,583 M 52 12-31 05/87 25.25 866
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 3,533 M 35 03-31 01/92 49.44 647
MAFB MAF Bancorp, Inc. of IL OTC Chicago IL Thrift 3,511 M 21 12-31 01/90 37.75 567
FLGS Flagstar Bancorp, Inc of MI OTC MI Thrift 2,564 M 19 12/31 / 23.88 326
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,999 M 35 03-31 07/92 42.38 380
DNFC D&N Financial Corp. of MI OTC Northern MI Ret. 1,868 M 37 12-31 02/85 25.88 236
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,688 M 26 12-31 08/83 24.25 309
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,648 M 23 09-30 06/93 41.25 215
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,580 M 49 12-31 11/89 34.75 322
ABCL Alliance Bancorp, Inc. of IL OTC Chicago IL M.B. 1,537 M 14 12-31 07/92 27.31 219
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,238 D 32 12-31 04/93 31.75 318
METF Metropolitan Fin. Corp. of OH OTC Northeast OH Thrift 990 M 15 12-31 / 15.63 110
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 915 M 26 12-31 08/94 29.13 155
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 846 M 17 12-31 06/90 27.38 225
GSBC Great Southern Bancorp of MO OTC Southwest MO Thrift 815 M 25 06-30 12/89 25.91 208
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 732 M 7 12-31 06/94 18.38 114
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 705 M 16 06-30 01/88 32.38 166
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 685 M 14 03-31 01/88 24.13 182
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 677 M 19 12-31 12/83 13.50 120
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 657 M 22 12-31 07/92 12.38 53
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 645 M 10 06-30 06/93 32.50 132
EMLD Emerald Financial Corp. of OH OTC Cleveland OH Thrift 616 M 14 12-31 / 13.25 136
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 607 M 5 12-31 04/95 18.13 60
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 577 M 10 12-31 10/95 15.50 126
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 576 M 11 12-31 / 29.00 106
FFSX First FSB MHC Sxld of IA(46.1) OTC Western IA Thrift 571 M 13 06-30 07/92 37.25 106
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 570 M 19 06-30 04/92 36.00 106
HFGI Harrington Fin. Group of IN OTC Eastern IN Thrift 553 M 4 06-30 / 11.50 38
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 540 M 12 12-31 03/96 17.38 97
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 520 D 13 03-31 09/93 32.75 127
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 490 M 5 12-31 02/92 36.00 113
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 484 M 5 09-30 12/93 23.75 67
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
June 8, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 446 M 12 12-31 03/92 48.75 62
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 421 M 3 06-30 01/94 14.88 44
PERM Permanent Bancorp, Inc. of IN OTC Southwest IN Thrift 420 D 11 03-31 04/94 16.50 69
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 419 M 9 06-30 12/92 26.50 70
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 411 M 11 09-30 10/94 19.25 57
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 407 M 8 06-30 07/87 27.50 114
CASH First Midwest Fin., Inc. of OH OTC IA,SD R.E. 405 M 12 09-30 09/93 24.25 64
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 402 M 5 06-30 03/94 27.25 53
KNK Kankakee Bancorp, Inc. of IL AMEX Illinois Thrift 399 M 9 12-31 01/93 34.75 48
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 393 M 6 12-31 06/92 31.75 89
FMBD First Mutual Bancorp Inc of IL OTC Central IL Thrift 390 M 14 12-31 07/95 17.25 61
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 388 M 8 12-31 03/87 19.75 64
INBI Industrial Bancorp of OH OTC Northern OH Thrift 374 M 10 12-31 08/95 20.94 106
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 372 D 10 12-31 07/94 26.00 61
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 369 M 4 12-31 09/96 17.38 119
EFC EFC Bancorp Inc of IL AMEX Southeast IL Thrift 362 P 6 DEC 04/98 14.00 97
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 353 M 9 09-30 03/95 32.50 77
FFFD North Central Bancshares of IA OTC Central IA Thrift 333 M 4 12-31 03/96 21.50 70
WFI Winton Financial Corp. of OH AMEX Cincinnati OH R.E. 324 S 5 09-30 08/88 16.25 65
WCBI WestCo Bancorp, Inc. of IL OTC Chicago IL Thrift 316 D 1 12-31 06/92 30.38 75
FSFF First SecurityFed Fin of IL OTC Chicago, IL Thrift 316 D 5 12-31 10/97 16.75 107
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 301 D 5 09-30 10/94 29.38 65
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 301 M 7 09-30 07/87 22.00 74
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 300 M 5 06-30 11/90 22.25 51
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 291 M 5 09-30 03/94 27.00 45
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 280 M 7 12-31 05/96 20.00 51
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 260 M 2 06-30 04/87 28.00 31
WAYN Wayne Svgs Bks MHC of OH (47.8 OTC Central OH Thrift 255 D 6 03-31 06/93 27.25 68
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 251 M 5 12-31 02/93 16.75 42
GFED Guaranty Fed Bancshares of MO OTC Southwest MO Thrift 246 M 4 06-30 12/97 13.25 82
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 232 M 7 12-31 01/88 17.25 31
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 232 M 8 06-30 12/93 22.50 43
LARK Landmark Bancshares, Inc of KS OTC Central KS Thrift 231 M 5 09-30 03/94 27.00 45
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
June 8, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBI Equality Bancorp, Inc. of MO AMEX St Louis Thrift 229 D 3 03-31 12/97 13.56 34
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 227 M 3 09-30 10/94 16.00 36
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 224 D 2 06-30 06/93 24.13 30
HFBC HopFed Bancorp of KY OTC Southwest KY Thrift 221 M 5 09-30 02/98 20.50 83
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 221 M 3 09-30 04/95 20.88 54
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 216 M 4 12-31 02/95 31.75 29
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 212 M 6 09-30 07/92 25.75 41
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 209 M 3 06-30 12/96 19.38 49
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 201 D 8 12-31 04/95 21.00 41
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 200 M 3 12-31 06/95 22.00 37
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 199 M 4 06-30 04/93 17.25 25
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 197 M 4 06-30 08/87 7.63 24
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 197 M 3 12-31 08/96 18.20 42
MARN Marion Capital Holdings of IN OTC Central IN Thrift 193 M 2 06-30 03/93 28.25 50
HMLK Hemlock Fed. Fin. Corp. of IL OTC Chicago IL Thrift 191 M 3 12-31 04/97 18.88 38
PULB Pulaski Bk,SB MHC of MO (29.8) OTC St. Louis MO Thrift 180 D 5 09-30 05/94 45.50 96
EGLB Eagle BancGroup of IL OTC Central IL Thrift 180 M 3 12-31 07/96 19.38 23
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 180 M 3 06-30 03/95 14.25 37
FBSI First Bancshares, Inc. of MO OTC Southcentral MO Thrift 178 M 6 06-30 12/93 13.38 30
JXSB Jcksnville SB,MHC of IL (45.6) OTC Central IL Thrift 170 M 4 12-31 04/95 22.50 43
FFWD Wood Bancorp of OH OTC Northern OH Thrift 165 M 7 06-30 08/93 17.00 45
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 159 M 4 12-31 11/92 15.88 16
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 157 M 8 06-30 04/94 21.56 35
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 153 D 2 06-30 04/95 30.25 41
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 147 M 7 09-30 10/92 11.75 20
GTPS Great American Bancorp of IL OTC East Central IL Thrift 146 M 3 12-31 06/95 21.50 34
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 137 D 6 12-31 12/96 18.38 22
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 134 D 2 12-31 09/96 13.50 38
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 133 M 3 06-30 07/95 16.50 27
CLAS Classic Bancshares, Inc. of KY OTC Eastern KY Thrift 133 D 3 03-31 12/95 16.13 21
PTRS Potters Financial Corp of OH OTC Northeast OH Thrift 127 M 4 12-31 12/93 18.75 18
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 124 M 2 09-30 10/93 14.13 14
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 121 M 3 03-31 09/95 19.38 16
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
June 8, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 118 M 2 12-31 12/93 16.94 22
CBES CBES Bancorp, Inc. of MO OTC Western MO Thrift 116 M 2 06-30 09/96 21.25 20
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 115 M 1 06-30 05/95 14.56 24
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 113 M 5 09-30 04/95 18.75 19
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 113 M 1 09-30 11/96 20.75 40
FTNB Fulton Bancorp, Inc. of MO OTC Central MO Thrift 110 M 2 06-30 10/96 19.88 34
MONT Montgomery Fin. Corp. of IN OTC Westcentral IN Thrift 109 M 4 06-30 07/97 12.88 21
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 M 2 09-30 10/95 16.88 33
UCBC Union Community Bancorp of IN OTC W.Central IN Thrift 108 M 1 12-31 12/97 14.69 45
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 106 M 4 12-31 04/96 18.38 18
PSFC Peoples Sidney Fin. Corp of OH OTC WestCentral OH Thrift 106 M 1 06-30 04/97 20.50 37
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 102 M 3 06-30 02/95 21.38 19
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 102 M 2 09-30 06/95 15.25 22
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 100 M 1 06-30 04/96 23.50 34
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 100 D 3 03-31 10/94 20.69 17
CNSB CNS Bancorp, Inc. of MO OTC Central MO Thrift 98 M 5 12-31 06/96 17.63 29
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 97 D 4 06-30 08/95 20.00 17
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 95 D 1 12-31 08/94 19.63 41
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 95 M 1 09-30 06/96 15.75 18
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 93 D 3 09-30 10/94 15.00 13
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 93 M 3 06-30 06/94 16.13 14
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 90 M 3 06-30 03/95 19.25 15
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 90 M 2 06-30 01/94 14.38 22
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 89 M 1 12-31 06/95 18.50 23
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 86 M 1 09-30 02/95 24.00 20
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 84 M 1 12-31 11/96 13.75 29
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 82 M 2 09-30 09/96 15.38 22
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 82 M 2 06-30 08/95 15.75 20
HLFC Home Loan Financial Corp of OH OTC Central Ohio Thrift 80 M 0 03/98 15.75 35
MSBF MSB Financial, Inc of MI OTC Southcentral MI Thrift 79 M 2 06-30 02/95 16.25 20
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 76 M 1 06-30 12/96 16.63 15
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 63 M 1 12-31 01/95 19.00 16
NSLB NS&L Bancorp, Inc of Neosho MO OTC Southwest MO Thrift 61 M 2 09-30 06/95 17.50 12
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
June 8, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MRKF Market Fin. Corp. of OH OTC Cincinnati OH Thrift 58 M 2 09-30 03/97 14.00 19
FLKY First Lancaster Bncshrs of KY OTC Central KY Thrift 53 M 1 06-30 07/96 15.56 15
CSBF CSB Financial Group Inc of IL OTC Centralia IL Thrift 49 S 2 09-30 10/95 13.75 12
RELI Reliance Bancshares Inc of WI OTC Milwaukee WI Thrift 44 M 1 06-30 04/96 8.13 19
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 41 M 1 06-30 07/96 8.75 8
JOAC Joachim Bancorp, Inc. of MO OTC Eastern MO Thrift 34 D 1 03-31 12/95 16.38 12
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT (40.1) (3) OTC Southwestern CT Div. 9,150 M 111 12-31 07/88 38.13 2,443
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH,MA Div. 7,310 M 141 12-31 12/86 22.50 1,252
WBST Webster Financial Corp. of CT OTC Central CT Thrift 7,020 D 84 12-31 12/86 33.75 925
SISB SIS Bancorp, Inc. of MA (3) OTC Central MA Div. 1,794 M 25 12-31 02/95 41.88 292
BRKL Brookline Bncp MHC of MA(47.0) OTC Brookline Thrift 1,451 P 5 08-31 03/98 16.81 489
ANDB Andover Bancorp, Inc. of MA (3) OTC MA,NH M.B. 1,386 M 12 12-31 05/86 34.25 222
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,293 M 15 12-31 08/87 22.75 171
FAB FirstFed America Bancorp of MA AMEX MA,RI M.B. 1,160 D 13 03-31 01/97 20.31 177
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,141 M 12 12-31 10/95 38.44 253
MDBK Medford Bancorp, Inc. of MA (3) OTC Eastern MA Thrift 1,120 M 16 12-31 03/86 42.50 193
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 1,032 M 10 12-31 10/95 23.38 127
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 1,016 M 11 12-31 07/86 35.63 187
FFES First Fed of E. Hartford CT OTC Central CT Thrift 991 M 12 12-31 06/87 37.00 100
MECH MECH Financial Inc of CT (3) OTC Hartford CT Thrift 946 M 14 12-31 06/96 29.88 158
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 929 M 15 12-31 05/86 49.50 178
PBKB People's Bancshares of MA (3) OTC Southeastern MA Thrift 862 M 14 12-31 10/86 26.38 87
NSSY NSS Bancorp of CT (3) OTC Southwest CT Thrift 669 M 8 12-31 06/94 42.50 101
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 651 M 14 12-31 12/81 28.00 130
MWBX MetroWest Bank of MA (3) OTC Eastern MA Thrift 647 M 12 12-31 10/86 7.69 109
ABBK Abington Bancorp of MA (3) OTC Southeastern MA M.B. 550 M 8 12-31 06/86 18.00 64
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 533 M 5 12-31 07/86 5.13 86
SWCB Sandwich Bancorp of MA (3) OTC Southeastern MA Thrift 527 M 11 12-31 07/86 63.50 124
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 480 M 3 12-31 07/86 20.38 104
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
June 8, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
New England Companies (continued)
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 371 D 6 12-31 07/86 12.38 95
NMSB Newmil Bancorp, Inc. of CT (3) OTC Western CT Thrift 370 M 15 06-30 02/86 13.50 52
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 367 D 8 03-31 10/86 28.44 56
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 355 M 5 12-31 05/86 16.13 70
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 321 M 10 12-31 05/86 19.63 41
BYS Bay State Bancorp of MA (3) NYSE Brookline Thrift 290 P 0 DEC 03/98 28.63 73
NBN Northeast Bancorp of ME (3) AMEX Eastern ME Thrift 279 D 11 06-30 08/87 17.00 38
ANE Alliance Bncp of New Eng of CT (3) AMEX Northern CT Thrift 247 M 7 12-31 12/86 16.00 40
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 238 M 6 12-31 05/93 18.00 43
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 232 M 5 12-31 12/88 36.75 48
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 226 M 2 12-31 08/88 25.00 46
MYST Mystic Financial of MA (3) OTC Medford Thrift 188 M 3 06-30 01/98 15.25 41
FCME First Coastal Corp. of ME (3) OTC Southern ME Thrift 150 M 7 12-31 / 13.56 18
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 150 S 8 12-31 06/93 18.63 23
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 132 D 4 04-30 12/87 25.00 22
NTMG Nutmeg FS&LA of CT OTC Eastern CT M.B. 112 M 3 12-31 / 10.88 11
FCB Falmouth Bancorp, Inc. of MA (3) AMEX Southeast MA Thrift 105 M 2 09-30 03/96 20.00 29
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 63 M 2 03-31 11/89 11.50 8
North-West Companies
- --------------------
WAMU Washington Mutual, Inc. of WA (3) OTC CA,WA,FL,OR,UT Div. 96,981 D 914 12-31 03/83 70.63 18,215
WFSL Washington Federal, Inc. of WA OTC Western US Thrift 5,713 D 104 09-30 11/82 27.81 1,457
IWBK Interwest Bancorp of WA OTC Western WA Div. 2,091 M 39 09-30 / 45.63 384
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,888 M 41 12-31 / 26.25 199
FWWB First Savings Bancorp of WA OTC Central WA Thrift 1,137 D 20 03-31 11/95 25.88 263
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 994 M 33 09-30 10/95 19.81 198
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 547 M 12 03-31 08/86 17.75 133
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 451 S 8 12-31 12/85 17.13 71
CASB Cascade Financial Corp. of WA OTC Seattle WA Thrift 435 M 11 06-30 09/92 19.50 66
HFWA Heritage Financial Corp of WA OTC NW Washington Thrift 323 M 10 06-30 01/98 15.25 149
RVSB Riverview Bancorp of WA OTC Southwest WA Thrift 273 M 9 03-31 10/97 16.75 103
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
June 8, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
North-West Companies (continued)
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TSBK Timberland Bancorp of WA OTC Grays Harbor Thrift 261 M 5 06-30 01/98 17.25 105
OTFC Oregon Trail Fin. Corp. of OR OTC Baker City Thrift 257 D 7 03-31 10/97 16.63 72
FBNW FirstBank Corp of Clarkston WA OTC West. WA/East ID Thrift 184 M 5 03-31 07/97 21.13 42
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 D 3 12-31 01/97 16.88 44
South-East Companies
- --------------------
BNKU Bank United Corp. of TX OTC TX,AZ Thrift 13,109 M 71 09-30 08/96 50.00 1,580
FFCH First Fin. Holdings Inc. of SC OTC Charleston SC Div. 1,858 M 34 09-30 11/83 23.13 314
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 1,275 D 31 09-30 12/83 23.50 273
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 979 M 10 06-30 12/95 12.63 217
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 934 D 14 03-31 04/86 23.00 132
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 734 M 19 12-31 08/92 24.50 122
FCBK First Coastal Bankshares of VA OTC Southeast VA M.B. 625 M 14 12-31 11/80 17.94 89
CFCP Coastal Fin. Corp. of SC OTC South Carolina Thrift 583 M 9 09-30 09/90 25.00 117
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 570 M 13 12-31 05/96 27.75 136
FSPT FirstSpartan Fin. Corp. of SC OTC Northwestern SC Thrift 503 M 7 06-30 07/97 45.81 203
TSH Teche Holding Company of LA AMEX Southern LA Thrift 407 M 9 09-30 04/95 20.00 69
PFSL Pocahontas Bancorp of AR OTC Northeast AR Thrift 401 M 6 09-30 04/98 9.94 66
COOP Cooperative Bancshares of NC OTC Eastern NC Thrift 381 M 16 12-31 08/91 18.25 54
CAVB Cavalry Bancorp of TN OTC Murfreesburg Thrift 351 M 0 Sept 03/98 23.50 177
FSTC First Citizens Corp of GA OTC Western GA M.B. 337 S 9 03-31 03/86 31.88 88
HBSC Heritage Bancorp, Inc of SC OTC Laurens Thrift 312 P 4 Sept 04/98 21.00 97
UFRM United FSB of Rocky Mount NC OTC Eastern NC M.B. 306 M 13 12-31 07/80 17.69 58
SOPN First Svgs Bancorp of NC OTC Central NC Thrift 300 M 5 06-30 01/94 23.25 86
ANA Acadiana Bancshares, Inc of LA AMEX Southern LA Thrift 293 M 5 12-31 07/96 23.00 59
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 254 M 2 09-30 03/96 18.00 81
FLAG Flag Financial Corp of GA OTC Western GA M.B. 248 D 4 12-31 12/86 23.00 70
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 217 M 2 09-30 10/96 9.75 46
HCBB HCB Bancshares of Camden AR OTC Southern AR Thrift 205 D 7 06-30 05/97 15.63 41
ESX Essex Bancorp of Norfolk VA AMEX VA,NC M.B. 193 M 4 12-31 07/90 3.88 4
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 185 M 5 09-30 07/95 30.38 53
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
June 8, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
South-East Companies (continued)
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 183 D 4 03-31 03/88 14.88 38
FFDB FirstFed Bancorp, Inc. of AL OTC Central AL Thrift 179 D 8 03-31 11/91 24.50 28
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 178 M 3 09-30 04/96 16.38 70
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 176 M 7 09-30 02/87 14.50 46
GBNK Gaston Fed Bncp MHC of NC(47.0 OTC Southwest NC Thrift 171 P 4 9-30 04/98 16.75 75
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 162 M 2 09-30 02/95 19.75 19
BFSB Bedford Bancshares, Inc. of VA OTC Southern VA Thrift 153 M 3 09-30 08/94 29.38 34
HBS Haywood Bancshares, Inc. of NC (3) AMEX Northwest NC Thrift 152 M 4 12-31 12/87 22.88 29
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 143 M 5 12-31 07/95 23.94 21
PDB Piedmont Bancorp, Inc. of NC AMEX Central NC Thrift 133 M 1 06-30 12/95 10.00 28
GSLA GS Financial Corp. of LA OTC New Orleans LA Thrift 129 M 3 12-31 04/97 18.00 60
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 118 M 4 06-30 11/96 17.50 33
SBAN SouthBanc Shares Inc. of SC OTC Northwest SC Thrift 117 P 6 09-30 04/98 19.88 30
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 111 M 2 12-31 04/96 19.94 38
TWIN Twin City Bancorp, Inc. of TN OTC Northeast TN Thrift 110 M 3 12-31 01/95 14.00 18
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 106 S 4 06-30 10/95 16.13 20
CENB Century Bancorp, Inc. of NC OTC Charlotte NC Thrift 104 M 1 06-30 12/96 19.75 25
PEDE Great Pee Dee Bancorp of SC OTC Northeast SC Thrift 79 P 1 06-30 12/97 15.50 34
UTBI United Tenn. Bancshares of TN OTC Eastern TN Thrift 75 M 2 12-31 01/98 14.88 22
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 71 S 1 09-30 12/96 16.75 19
SSB Scotland Bancorp, Inc. of NC AMEX S. Central NC Thrift 61 M 2 09-30 04/96 8.63 17
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 M 3 06-30 07/94 21.50 12
MBSP Mitchell Bancorp, Inc. of NC OTC Western NC Thrift 37 M 1 06-30 07/96 16.75 16
South-West Companies
- --------------------
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,966 M 37 12-31 / 38.50 194
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 303 D 6 03-31 06/93 23.00 38
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 237 M 6 09-30 04/96 20.88 51
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 121 M 2 09-30 01/95 15.88 24
GUPB GFSB Bancorp, Inc of Gallup NM OTC Northwest NM Thrift 118 M 1 06-30 06/95 15.50 19
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 114 M 3 12-31 08/86 12.00 15
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1 (Continued)
Characteristics of Publicly-Traded Thrifts
June 8, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ---------------------------------- ------ ---------------- --------- ------ ------- ------ ----- ----- ------
($Mil) ($) ($Mil)
South-West Companies (continued)
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBA First Colorado Bancorp of CO OTC Colorado Thrift 1,555 D 27 12-31 01/96 28.50 480
WSTR WesterFed Fin. Corp. of MT OTC Montana Thrift 1,035 D 36 06-30 01/94 24.50 137
UBMT United Fin. Corp. of MT OTC Central MT Thrift 96 D 4 12-31 09/86 29.50 36
HCBC High Country Bancorp of CO OTC Salida Thrift 92 M 2 12-31 12/97 15.25 20
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 89 M 2 12-31 09/93 15.25 18
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 62 M 1 09-30 03/96 18.13 17
Other Areas
- -----------
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and Ret.=Retail
Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 06/08/98
<PAGE>
EXHIBIT III-2
Financial Analysis of All Publicly-Traded MHCs
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-2
Market Pricing Comparatives
Prices As of May 29, 1998
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization -------------- Dividends(4)
---------------- Core Book Pricing Ratios(3) ------------------------
Price/ Market 12-Mth Value/ ------------------------------------ Amount/ Payout
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
- ----------------------------------- -------- ------ ------ ------ ----- ------ ----- ------ ------ ------- ----- --------
($) ($Mil) ($) ($) (x) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 22.12 175.90 0.97 13.86 20.00 162.60 20.77 168.78 20.78 0.34 1.56 30.74
MHC Institutions 24.10 121.86 0.60 10.02 27.02 224.96 29.37 235.78 27.38 0.37 1.45 11.59
Comparable Group
- ----------------
MHC Institutions
- ----------------
ALLB Alliance Bank MHC of PA (19.9) 35.00 22.75 0.62 8.93 NM NM 42.00 NM NM 0.00 0.00 0.00
BRKL Brookline Bncp MHC of MA(47.0) 16.81 229.88 0.39 8.56 NM 196.38 33.70 196.38 NM 0.00 0.00 0.00
CMSV Commty. Svgs, MHC of FL (48.5) 35.38 87.39 0.95 16.11 NM 219.62 23.72 219.62 NM 0.90 2.54 NM
FFFL Fidelity Bcsh MHC of FL (47.7) 30.06 96.91 0.92 13.01 28.09 231.05 15.48 238.19 NM 0.90 2.99 NM
SKBO First Carnegie MHC of PA(45.0) 19.88 20.58 0.46 10.74 NM 185.10 31.83 185.10 NM 0.30 1.51 29.35
FFSX First FSB MHC Sxld of IA(46.1) 37.25 48.54 1.17 14.51 NM 256.72 18.51 324.48 NM 0.48 1.29 18.84
GBNK Gaston Fed Bncp MHC of NC(47.0) 16.75 35.39 0.43 8.56 NM 195.68 44.00 195.68 NM 0.00 0.00 0.00
HARS Harris Fin. MHC of PA (24.3) 25.50 208.31 0.45 5.41 NM NM 38.29 NM NM 0.22 0.86 11.77
JXSB Jcksnville SB,MHC of IL (45.6) 22.50 13.05 0.33 9.23 NM 243.77 25.31 243.77 NM 0.30 1.33 NM
LFED Leeds Fed Bksr MHC of MD (36.3) 20.25 38.13 0.66 9.52 NM 212.71 35.10 212.71 NM 0.56 2.77 NM
NBCP Niagara Bancorp of NY MHC(45.4) 15.88 214.41 0.58 12.71 27.38 124.94 15.03 124.94 27.38 0.00 0.00 0.00
NWSB Northwest Bcrp MHC of PA (30.7) 16.25 233.22 0.44 4.55 NM NM 31.59 NM NM 0.16 0.98 11.14
PBHC Pathfinder BC MHC of NY (46.1) 22.63 19.96 0.50 8.15 NM 277.67 32.66 327.50 NM 0.20 0.88 12.46
PBCT Peoples Bank, MHC of CT (40.1) 38.13 932.39 0.80 13.18 25.59 289.30 26.71 337.73 NM 0.84 2.20 NM
PHSB Ppls Home SB, MHC of PA (45.0) 20.25 25.15 0.56 10.33 NM 196.03 25.02 196.03 NM 0.24 1.19 19.29
PULB Pulaski Bk,SB MHC of MO (29.8)(7)45.50 28.39 0.78 11.49 NM NM 53.09 NM NM 1.10 2.42 NM
PLSK Pulaski SB, MHC of NJ (46.0) 18.50 17.61 0.55 10.44 NM 177.20 20.44 177.20 NM 0.30 1.62 24.63
SBFL SB Fngr Lakes MHC of NY (33.1) 20.00 23.64 0.22 6.10 NM 327.87 28.47 327.87 NM 0.24 1.20 NM
WAYN Wayne Svgs Bks MHC of OH (47.8) 27.25 29.29 0.71 9.74 NM 279.77 26.53 279.77 NM 0.56 2.06 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) 19.63 18.65 0.65 10.58 NM 185.54 43.58 185.54 NM 0.80 4.08 NM
</TABLE>
<PAGE>
Table III-2 (Continued)
<TABLE>
<CAPTION>
Financial Characteristics(6)
------------------------------------------------
Reported Core
Total Equity/ NPAs/ ----------- -----------
Financial Institution Assets Assets Assets ROA ROE ROA ROE
- ------------------------------------ ------ ------- ------ ---- ---- ---- ----
($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 1,060 13.86 0.65 0.93 7.97 0.88 7.51
MHC Institutions 1,228 12.37 0.59 0.83 7.16 0.76 6.39
Comparable Group
- ----------------
MHC Institutions
- ----------------
ALLB Alliance Bank MHC of PA (19.9) 273 10.72 1.38 0.80 7.09 0.80 7.09
BRKL Brookline Bncp MHC of MA(47.0) 1,451 17.16 0.62 0.78 4.56 0.78 4.56
CMSV Commty. Svgs, MHC of FL (48.5) 761 10.80 0.26 0.74 6.58 0.68 6.07
FFFL Fidelity Bcsh MHC of FL (47.7) 1,321 6.70 0.32 0.66 8.52 0.57 7.32
SKBO First Carnegie MHC of PA(45.0) 144 17.20 0.78 0.64 4.58 0.71 5.13
FFSX First FSB MHC Sxld of IA(46.1) 571 7.21 0.36 0.68 8.30 0.69 8.38
GBNK Gaston Fed Bncp MHC of NC(47.0) 171 22.48 0.32 1.13 5.02 1.13 5.02
HARS Harris Fin. MHC of PA (24.3) 2,260 8.12 0.66 0.88 10.93 0.72 8.95
JXSB Jcksnville SB,MHC of IL (45.6) 170 10.38 0.86 0.59 5.64 0.38 3.65
LFED Leeds Fed Bksr MHC of MD (36.3) 299 16.50 NA 1.18 7.20 1.18 7.20
NBCP Niagara Bancorp of NY MHC(45.4) 3,145 12.03 0.25 0.55 4.56 0.55 4.56
NWSB Northwest Bcrp MHC of PA (30.7) 2,409 8.85 0.69 0.95 10.14 0.95 10.14
PBHC Pathfinder BC MHC of NY (46.1) 196 11.76 1.33 0.91 7.74 0.73 6.24
PBCT Peoples Bank, MHC of CT (40.1) 9,150 9.23 0.66 1.18 13.44 0.63 7.21
PHSB Ppls Home SB, MHC of PA (45.0) 223 12.76 0.36 0.81 7.30 0.72 6.49
PULB Pulaski Bk,SB MHC of MO (29.8)(7) 180 13.41 NA 1.07 8.15 0.92 6.99
PLSK Pulaski SB, MHC of NJ (46.0) 191 11.54 0.73 0.63 5.86 0.63 5.86
SBFL SB Fngr Lakes MHC of NY (33.1) 251 8.68 0.27 0.40 4.39 0.34 3.72
WAYN Wayne Svgs Bks MHC of OH (47.8) 255 9.48 NA 0.75 8.03 0.70 7.51
WCFB Wbstr Cty FSB MHC of IA (45.2) 95 23.49 0.12 1.46 6.23 1.46 6.23
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT IV-1
Stock Prices:
As of May 29, 1998
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(292) 22.02 6,764 182.2 24.60 15.53 22.30 -1.20 44.89 4.96
NYSE Traded Companies(8) 43.34 37,199 1,794.8 48.43 27.11 44.86 -3.30 50.37 3.46
AMEX Traded Companies(22) 18.18 3,372 59.5 21.14 14.11 18.38 -1.17 31.19 2.58
NASDAQ Listed OTC Companies(261) 21.85 6,308 152.6 24.33 15.37 22.10 -1.14 45.93 4.99
California Companies(19) 29.50 13,758 652.1 32.84 19.45 30.37 -2.57 42.92 3.76
Florida Companies(6) 22.06 24,780 481.6 24.46 14.62 20.92 3.56 53.69 0.16
Mid-Atlantic Companies(58) 22.97 9,699 212.3 25.48 15.36 23.28 -1.44 54.04 7.45
Mid-West Companies(134) 20.94 4,698 122.1 23.54 14.95 21.23 -1.31 40.98 3.31
New England Companies(8) 22.35 6,864 198.4 24.97 14.51 22.89 -2.17 59.83 2.13
North-West Companies(11) 22.91 10,609 270.8 24.64 17.90 22.82 0.54 42.78 18.49
South-East Companies(44) 21.47 4,230 114.7 24.30 16.03 21.71 -0.92 41.79 4.91
South-West Companies(6) 20.55 2,287 60.5 21.90 14.10 21.06 -2.17 55.64 3.94
Western Companies (Excl CA)(6) 20.53 2,050 45.6 22.10 15.24 20.75 -0.98 43.98 6.54
Thrift Strategy(245) 21.00 4,666 109.6 23.51 15.14 21.21 -1.00 42.97 4.82
Mortgage Banker Strategy(29) 29.41 18,081 637.4 32.28 18.77 30.21 -1.99 55.62 3.10
Real Estate Strategy(8) 27.63 6,612 167.4 29.74 16.01 28.26 -2.77 70.52 22.96
Diversified Strategy(7) 27.46 45,244 1,292.1 31.90 19.46 27.71 -1.63 37.79 -3.27
Retail Banking Strategy(3) 20.34 4,580 106.2 23.42 12.59 21.50 -5.31 64.73 3.08
Companies Issuing Dividends(239) 22.57 6,725 191.5 25.20 15.84 22.86 -1.23 43.63 3.24
Companies Without Dividends(53) 19.56 6,940 140.7 21.89 14.13 19.81 -1.06 50.53 12.63
Equity/Assets less than 6%(21) 25.78 16,225 400.1 28.55 15.36 26.15 -1.04 68.78 9.00
Equity/Assets 6-12%(133) 24.32 7,330 242.6 26.95 16.09 24.62 -1.12 50.20 3.59
Equity/Assets greater than 12%(138) 19.37 4,847 95.2 21.88 15.05 19.63 -1.29 36.54 5.60
Converted Last 3 Mths (no MHC)(11) 15.45 16,997 253.6 16.98 13.32 15.57 -0.58 75.71 42.50
Actively Traded Companies(34) 30.60 23,613 802.4 33.67 20.13 31.25 -1.52 53.41 2.65
Market Value Below $20 Million(43) 16.10 1,013 15.7 18.60 12.25 16.32 -1.41 32.46 -1.10
Holding Company Structure(267) 22.33 6,738 186.2 24.92 15.81 22.58 -1.08 43.59 5.40
Assets Over $1 Billion(59) 29.63 23,340 706.3 32.76 19.96 29.93 -0.81 51.08 6.04
Assets $500 Million-$1 Billion(40) 24.88 5,413 123.5 27.17 16.31 25.28 -1.49 56.20 6.28
Assets $250-$500 Million(71) 21.91 3,359 68.5 24.53 15.30 22.14 -0.87 50.72 9.07
Assets less than $250 Million(122) 17.84 1,661 29.0 20.23 13.46 18.10 -1.46 35.56 1.85
Goodwill Companies(118) 24.65 12,267 316.2 27.46 16.74 24.89 -1.12 49.21 4.73
Non-Goodwill Companies(174) 20.30 3,165 94.6 22.73 14.74 20.61 -1.25 42.07 5.10
Acquirors of FSLIC Cases(8) 39.83 30,421 1,665.5 43.47 25.97 41.94 -5.21 55.12 3.85
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(59) 25.56 16,079 647.4 28.17 17.05 25.88 -1.20 55.88 5.15
NYSE Traded Companies(5) 35.86 51,255 1,694.3 37.79 26.93 35.70 0.34 53.93 15.18
AMEX Traded Companies(6) 20.78 2,417 53.2 23.20 13.33 21.03 -0.71 63.00 9.81
NASDAQ Listed OTC Companies(48) 24.93 13,634 595.9 27.64 16.35 25.31 -1.44 55.29 3.48
California Companies(1) 22.63 7,700 174.3 24.00 15.00 23.50 -3.70 52.08 17.56
Mid-Atlantic Companies(21) 26.91 22,192 657.9 28.77 17.92 26.92 -0.62 60.24 6.04
New England Companies(31) 24.66 5,770 134.2 27.56 15.91 25.02 -1.39 61.04 6.96
North-West Companies(3) 35.17 89,844 6,139.6 38.60 26.71 37.00 -1.94 28.47 1.09
South-East Companies(3) 16.71 2,611 35.8 20.96 13.23 16.96 -1.60 8.78 -17.47
Thrift Strategy(45) 25.01 8,288 238.3 27.36 16.60 25.07 -0.59 57.69 6.61
Mortgage Banker Strategy(6) 23.46 28,757 787.2 27.28 14.95 24.39 -3.44 54.71 -5.80
Real Estate Strategy(3) 17.51 7,682 134.6 19.19 11.72 17.94 -1.85 50.53 12.61
Diversified Strategy(5) 35.80 68,104 4,039.0 39.48 25.41 37.43 -3.31 44.58 3.36
Companies Issuing Dividends(50) 26.60 17,915 733.0 29.30 17.50 26.93 -1.21 54.83 4.08
Companies Without Dividends(9) 18.53 3,752 72.6 20.59 14.06 18.79 -1.17 62.89 12.34
Equity/Assets less than 6%(5) 33.09 78,062 4,389.0 36.16 20.79 34.15 -1.18 82.66 7.70
Equity/Assets 6-12%(37) 26.45 8,962 276.5 29.06 16.68 26.60 -0.82 56.93 3.88
Equity/Assets greater than 12%(17) 21.66 11,245 245.0 24.13 16.65 22.08 -1.93 46.02 6.80
Converted Last 3 Mths (no MHC)(2) 19.35 19,386 218.6 22.23 16.74 19.81 -2.37 72.78 14.09
Actively Traded Companies(17) 33.36 34,705 1,759.0 36.11 21.94 34.02 -1.46 55.59 6.19
Market Value Below $20 Million(1) 13.56 1,359 18.4 15.75 8.88 13.63 -0.51 42.74 -8.87
Holding Company Structure(47) 25.12 14,869 647.0 27.75 17.17 25.53 -1.48 53.60 5.40
Assets Over $1 Billion(18) 35.14 41,677 1,894.4 37.50 23.49 35.56 -1.09 55.19 9.52
Assets $500 Million-$1 Billion(14) 24.90 8,497 140.7 27.66 15.66 25.58 -2.65 60.15 2.05
Assets $250-$500 Million(12) 19.55 3,893 70.3 22.31 14.07 19.84 -1.27 51.27 0.45
Assets less than $250 Million(15) 19.94 1,870 33.5 22.61 13.08 19.93 -0.31 57.50 6.03
Goodwill Companies(31) 27.31 26,737 1,145.4 30.11 17.74 27.98 -2.06 61.71 5.36
Non-Goodwill Companies(27) 23.62 5,532 152.2 25.99 15.90 23.56 -0.27 50.31 3.47
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(17) 23.83 9,676 71.8 26.84 13.69 24.37 -1.83 96.20 15.19
BIF-Insured Thrifts(3) 25.55 32,223 388.9 28.09 15.99 26.21 -2.70 91.88 24.10
NASDAQ Listed OTC Companies(20) 24.10 13,236 121.9 27.04 14.05 24.66 -1.97 95.52 16.60
Florida Companies(2) 32.72 5,951 92.2 38.07 20.25 33.13 -0.80 61.49 -3.75
Mid-Atlantic Companies(10) 21.41 13,256 82.4 24.39 10.97 22.21 -2.95 121.54 15.56
Mid-West Companies(5) 26.66 2,336 27.4 29.13 15.26 27.06 -1.80 70.08 7.84
New England Companies(2) 27.47 46,589 581.1 29.56 19.75 27.60 0.44 64.32 34.22
South-East Companies(1) 16.75 4,497 35.4 18.06 16.25 16.75 0.00 67.50 67.50
Thrift Strategy(18) 23.19 9,027 69.1 26.16 13.94 23.71 -1.85 86.59 16.87
Mortgage Banker Strategy(1) 25.50 33,942 208.3 27.88 6.58 26.63 -4.24 282.31 28.27
Diversified Strategy(1) 38.13 64,083 932.4 41.13 23.50 38.81 -1.75 60.55 0.34
Companies Issuing Dividends(16) 24.90 12,324 120.9 28.11 13.76 25.34 -1.81 96.58 7.21
Companies Without Dividends(4) 21.11 16,655 125.6 23.01 15.16 22.11 -2.57 91.53 51.83
Equity/Assets 6-12%(12) 27.37 14,648 144.4 31.00 13.86 28.16 -2.63 113.73 9.71
Equity/Assets greater than 12%(8) 18.49 10,815 83.2 20.24 14.39 18.66 -0.83 64.31 28.42
Holding Company Structure(3) 21.92 11,690 87.9 24.38 13.31 22.44 -2.42 95.45 25.11
Assets Over $1 Billion(6) 23.77 35,086 319.2 26.23 14.64 24.19 -1.95 108.08 27.17
Assets $500 Million-$1 Billion(2) 36.32 3,969 68.0 39.88 21.25 37.13 -2.19 70.02 8.66
Assets $250-$500 Million(4) 25.63 3,627 28.5 29.31 11.87 26.56 -2.12 117.96 8.60
Assets less than $250 Million(8) 20.02 2,645 21.5 22.76 12.74 20.42 -1.84 79.21 14.38
Goodwill Companies(6) 28.30 26,222 256.6 31.25 14.22 28.87 -2.56 125.88 11.10
Non-Goodwill Companies(14) 22.16 7,242 59.7 25.09 13.98 22.72 -1.69 81.51 19.14
MHC Institutions(20) 24.10 13,236 121.9 27.04 14.05 24.66 -1.97 95.52 16.60
MHC Converted Last 3 Months(3) 16.48 21,116 159.9 17.68 16.04 16.48 0.00 64.80 64.80
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NYSE Traded Companies
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA(8) 76.25 109,737 8,367.4 82.81 40.25 82.81 -7.92 93.04 13.91
BYS Bay State Bancorp of MA* 28.63 2,535 72.6 32.63 28.50 29.31 -2.32 43.15 43.15
CFB Commercial Federal Corp. of NE 33.31 40,306 1,342.6 38.19 22.92 34.31 -2.91 44.32 -6.33
DME Dime Bancorp, Inc. of NY* 29.19 114,258 3,335.2 32.06 17.00 29.00 0.66 72.93 -3.50
DSL Downey Financial Corp. of CA 33.13 28,094 930.8 34.47 19.05 33.94 -2.39 73.91 22.34
FED FirstFed Fin. Corp. of CA 49.06 10,592 519.6 49.81 27.25 48.56 1.03 80.04 26.61
GSB Golden State Bancorp of CA(8) 38.31 51,328 1,966.4 41.81 25.13 37.75 1.48 57.14 2.32
GDW Golden West Fin. Corp. of CA 108.00 57,190 6,176.5 114.25 67.38 114.25 -5.47 63.93 10.42
GPT GreenPoint Fin. Corp. of NY* 41.19 84,469 3,479.3 42.06 29.34 39.75 3.62 37.30 13.53
JSB JSB Financial, Inc. of NY* 57.84 9,883 571.6 58.56 41.00 58.00 -0.28 29.25 15.54
OCN Ocwen Financial Corp. of FL 24.38 60,709 1,480.1 30.38 14.56 24.88 -2.01 68.14 -4.17
SIB Staten Island Bancorp of NY* 22.44 45,130 1,012.7 23.63 18.81 22.44 0.00 87.00 7.16
WES Westcorp Inc. of Orange CA 12.13 26,301 319.0 23.50 11.50 13.19 -8.04 -28.14 -28.14
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 23.00 2,575 59.2 25.63 19.00 22.50 2.22 21.05 -1.63
ANE Alliance Bncp of New Eng of CT* 16.00 2,493 39.9 16.08 8.19 15.51 3.16 101.51 45.45
BKC American Bank of Waterbury CT* 28.00 4,652 130.3 32.56 17.25 29.25 -4.27 66.57 14.85
BFD BostonFed Bancorp of MA 23.38 5,423 126.8 24.88 15.13 23.88 -2.09 53.92 6.86
CNY Carver Bancorp, Inc. of NY 13.63 2,314 31.5 17.13 9.63 14.13 -3.54 41.54 -16.12
CBK Citizens First Fin.Corp. of IL 20.00 2,536 50.7 22.38 15.38 19.75 1.27 21.21 -1.23
EFC EFC Bancorp Inc of IL 14.00 6,937 97.1 14.94 13.75 14.13 -0.92 40.00 40.00
EBI Equality Bancorp, Inc. of MO 13.56 2,486 33.7 16.00 12.50 14.75 -8.07 35.60 -6.48
ESX Essex Bancorp of Norfolk VA(8) 3.88 1,059 4.1 7.94 1.00 4.00 -3.00 181.16 -1.52
FCB Falmouth Bancorp, Inc. of MA* 20.00 1,455 29.1 23.88 15.75 20.50 -2.44 25.94 -2.44
FAB FirstFed America Bancorp of MA 20.31 8,707 176.8 23.25 14.63 20.75 -2.12 35.94 -7.18
GAF GA Financial Corp. of PA 20.38 7,595 154.8 22.25 15.88 20.56 -0.88 25.42 7.94
HBS Haywood Bancshares, Inc. of NC* 22.88 1,250 28.6 24.00 15.94 22.88 0.00 43.54 1.69
KNK Kankakee Bancorp, Inc. of IL 34.75 1,378 47.9 37.75 27.50 35.38 -1.78 26.92 -7.95
KYF Kentucky First Bancorp of KY 15.75 1,240 19.5 15.88 10.56 15.25 3.28 48.17 5.42
MBB MSB Bancorp of Middletown NY(8)* 36.00 2,844 102.4 37.75 17.75 37.75 -4.64 100.00 -4.33
NBN Northeast Bancorp of ME* 17.00 2,237 38.0 19.50 9.50 17.00 0.00 77.45 -10.53
NEP Northeast PA Fin. Corp of PA 14.88 6,427 95.6 16.00 14.50 15.00 -0.80 48.80 48.80
PDB Piedmont Bancorp, Inc. of NC 10.00 2,751 27.5 11.63 10.00 10.06 -0.60 -6.45 -8.09
SSB Scotland Bancorp, Inc. of NC 8.63 1,914 16.5 19.25 8.63 8.75 -1.37 -45.21 -13.18
SZB SouthFirst Bancshares of AL 19.75 976 19.3 22.75 14.88 20.00 -1.25 31.67 -13.19
SRN Southern Banc Company of AL 16.13 1,230 19.8 19.13 14.38 16.25 -0.74 11.24 -9.13
SSM Stone Street Bancorp of NC 19.94 1,881 37.5 27.25 19.25 20.06 -0.60 -23.69 -10.14
TSH Teche Holding Company of LA 20.00 3,439 68.8 23.50 17.50 20.13 -0.65 12.68 -12.09
FTF Texarkana Fst. Fin. Corp of AR 30.38 1,759 53.4 30.63 17.13 30.00 1.27 76.12 21.52
THR Three Rivers Fin. Corp. of MI 20.00 825 16.5 23.50 14.88 20.13 -0.65 33.33 -8.05
WSB Washington SB, FSB of MD 7.13 4,406 31.4 9.50 4.88 7.13 0.00 42.60 -21.30
WFI Winton Financial Corp. of OH 16.25 4,014 65.2 20.63 6.25 17.38 -6.50 124.14 59.47
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 28.00 1,090 30.5 34.50 18.41 30.00 -6.67 44.55 -4.40
FBER 1st Bergen Bancorp of NJ 19.25 2,729 52.5 20.75 13.63 19.25 0.00 37.50 0.63
AFED AFSALA Bancorp, Inc. of NY(8) 20.25 1,378 27.9 20.75 13.50 19.75 2.53 50.00 5.19
ALBK ALBANK Fin. Corp. of Albany NY 52.00 12,853 668.4 54.50 36.75 52.50 -0.95 37.28 1.09
AMFC AMB Financial Corp. of IN 18.38 964 17.7 19.38 14.00 18.75 -1.97 22.53 15.74
ASBP ASB Financial Corp. of OH 14.56 1,635 23.8 15.13 11.75 15.13 -3.77 23.91 9.89
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ABBK Abington Bancorp of MA* 18.00 3,564 64.2 22.25 11.75 19.13 -5.91 50.00 -14.29
AABC Access Anytime Bancorp of NM 12.00 1,217 14.6 13.00 5.52 11.75 2.13 117.39 9.09
AFBC Advance Fin. Bancorp of WV 18.13 1,074 19.5 20.88 13.63 18.25 -0.66 29.50 4.32
AFCB Affiliated Comm BC, Inc of MA(8) 38.44 6,581 253.0 41.88 23.20 38.25 0.50 69.34 1.83
ALBC Albion Banc Corp. of Albion NY 10.50 752 7.9 14.17 6.50 11.00 -4.55 58.37 -21.23
ABCL Alliance Bancorp, Inc. of IL 27.31 8,024 219.1 29.25 19.58 28.13 -2.92 38.28 3.06
ALLB Alliance Bank MHC of PA (19.9) 35.00 3,273 22.8 39.00 12.50 39.00 -10.26 171.74 12.90
AHCI Ambanc Holding Co., Inc. of NY* 19.19 4,258 81.7 20.00 13.88 19.63 -2.24 38.26 2.35
ASBI Ameriana Bancorp of IN 19.75 3,252 64.2 22.00 15.50 20.00 -1.25 26.36 -0.65
ABCW Anchor Bancorp Wisconsin of WI 42.38 8,963 379.9 46.50 21.25 43.13 -1.74 95.39 16.49
ANDB Andover Bancorp, Inc. of MA* 34.25 6,474 221.7 36.20 22.90 35.00 -2.14 51.55 6.37
ASFC Astoria Financial Corp. of NY 55.03 26,366 1,450.9 62.50 41.00 56.06 -1.84 35.04 -1.29
AVND Avondale Fin. Corp. of IL 18.13 3,324 60.3 18.88 13.25 17.75 2.14 34.30 11.57
BKCT Bancorp Connecticut of CT* 20.38 5,100 103.9 25.00 12.25 20.75 -1.78 66.37 -2.95
BPLS Bank Plus Corp. of CA 12.94 19,383 250.8 16.13 9.88 13.00 -0.46 23.95 2.45
BNKU Bank United Corp. of TX 50.00 31,596 1,579.8 56.00 34.75 51.38 -2.69 47.06 2.17
BWFC Bank West Fin. Corp. of MI 14.25 2,624 37.4 17.50 8.83 13.94 2.22 58.33 -11.66
BANC BankAtlantic Bancorp of FL 13.75 32,996 453.7 17.00 12.50 14.00 -1.79 -0.94 -17.91
BKUNA BankUnited Fin. Corp. of FL 18.03 15,468 278.9 18.13 9.38 17.38 3.74 80.30 17.00
BVCC Bay View Capital Corp. of CA 32.13 20,243 650.4 38.00 24.69 31.81 1.01 30.82 -11.37
FSNJ Bayonne Banchsares of NJ 16.25 9,050 147.1 17.38 8.03 16.75 -2.99 96.49 21.45
BFSB Bedford Bancshares, Inc. of VA 29.38 1,149 33.8 34.75 19.75 29.50 -0.41 46.90 -13.59
BFFC Big Foot Fin. Corp. of IL 19.38 2,513 48.7 23.94 15.63 20.00 -3.10 22.04 -7.71
BYFC Broadway Fin. Corp. of CA 12.00 863 10.4 13.75 10.50 12.13 -1.07 10.29 -9.43
BRKL Brookline Bncp MHC of MA(47.0) 16.81 29,095 229.9 17.98 16.00 16.38 2.63 68.10 68.10
CBES CBES Bancorp, Inc. of MO 21.25 940 20.0 26.00 16.13 21.75 -2.30 28.79 -4.49
CCFH CCF Holding Company of GA 23.94 897 21.5 23.94 14.32 23.25 2.97 67.18 18.93
CFSB CFSB Bancorp of Lansing MI 27.38 8,220 225.1 28.30 13.64 29.00 -5.59 107.74 14.75
CKFB CKF Bancorp of Danville KY 19.00 855 16.2 21.25 17.75 19.00 0.00 -1.30 2.70
CNSB CNS Bancorp, Inc. of MO 17.63 1,645 29.0 21.50 15.50 17.63 0.00 13.74 -14.00
CSBF CSB Financial Group Inc of IL 13.75 840 11.6 14.00 11.75 13.88 -0.94 14.58 1.85
CBCI Calumet Bancorp of Chicago IL 36.00 3,141 113.1 39.00 24.83 37.00 -2.70 42.12 8.27
CAFI Camco Fin. Corp. of OH 29.00 3,646 105.7 31.00 16.91 29.50 -1.69 73.97 13.73
CMRN Cameron Fin. Corp. of MO 20.88 2,563 53.5 22.19 16.25 21.63 -3.47 26.55 1.85
CAPS Capital Savings Bancorp of MO(8) 22.50 1,891 42.5 25.25 15.50 21.63 4.02 26.76 -10.89
CFNC Carolina Fincorp of NC* 17.50 1,906 33.4 18.88 14.38 18.13 -3.47 22.81 -5.41
CASB Cascade Financial Corp. of WA 19.50 3,399 66.3 20.00 12.00 17.25 13.04 17.47 47.17
CATB Catskill Fin. Corp. of NY* 17.75 4,461 79.2 19.13 15.25 17.88 -0.73 14.52 -5.99
CAVB Cavalry Bancorp of TN 23.50 7,538 177.1 25.25 20.56 23.88 -1.59 135.00 135.00
CNIT Cenit Bancorp of Norfolk VA 24.50 4,977 121.9 28.58 14.46 24.63 -0.53 70.97 -7.55
CEBK Central Co-Op. Bank of MA* 28.44 1,965 55.9 33.50 16.75 29.50 -3.59 71.02 -0.21
CENB Century Bancorp, Inc. of NC(8) 19.75 1,271 25.1 39.00 19.75 21.63 -8.69 -13.19 -30.09
COFI Charter One Financial of OH 34.25 128,136 4,388.7 36.38 22.26 35.69 -4.03 53.86 8.52
CVAL Chester Valley Bancorp of PA 32.19 2,185 70.3 37.00 17.86 32.50 -0.95 71.13 10.05
CTZN CitFed Bancorp of Dayton OH(8) 49.44 13,087 647.0 58.00 24.42 50.00 -1.12 101.80 26.77
CLAS Classic Bancshares, Inc. of KY 16.13 1,300 21.0 21.50 13.88 16.50 -2.24 11.24 -3.70
CBSA Coastal Bancorp of Houston TX 38.50 5,035 193.8 40.00 27.00 39.50 -2.53 43.93 10.38
CFCP Coastal Fin. Corp. of SC 25.00 4,686 117.2 27.75 19.63 24.50 2.04 18.32 2.04
CMSB Commonwealth Bancorp Inc of PA 23.63 16,264 384.3 23.81 14.63 23.81 -0.76 60.20 18.86
CMSV Commty. Svgs, MHC of FL (48.5) 35.38 5,100 87.4 40.75 21.75 37.00 -4.38 62.67 0.00
CFTP Community Fed. Bancorp of MS 18.00 4,527 81.5 21.00 16.38 18.00 0.00 2.86 -11.11
CFFC Community Fin. Corp. of VA 14.88 2,554 38.0 16.38 10.75 15.88 -6.30 35.27 7.75
CIBI Community Inv. Bancorp of OH 21.38 890 19.0 22.88 12.67 22.50 -4.98 68.75 32.30
COOP Cooperative Bancshares of NC 18.25 2,984 54.5 25.00 10.50 17.00 7.35 73.81 -25.51
CRZY Crazy Woman Creek Bncorp of WY 18.13 955 17.3 20.00 13.13 19.00 -4.58 37.45 20.87
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DNFC D&N Financial Corp. of MI 25.88 9,135 236.4 29.75 16.14 27.00 -4.15 57.04 -2.34
DCBI Delphos Citizens Bancorp of OH 20.75 1,904 39.5 24.25 14.00 22.25 -6.74 48.21 0.00
DIME Dime Community Bancorp of NY* 29.00 12,440 360.8 29.00 17.38 28.38 2.18 65.71 22.11
DIBK Dime Financial Corp. of CT(8)* 35.63 5,248 187.0 37.00 22.75 35.88 -0.70 61.95 16.82
ESBF ESB Financial Corp of PA 18.75 5,751 107.8 20.00 11.16 19.25 -2.60 68.01 7.14
EGLB Eagle BancGroup of IL 19.38 1,177 22.8 21.13 15.00 19.50 -0.62 26.01 2.65
EBSI Eagle Bancshares of Tucker GA 23.00 5,719 131.5 27.25 16.13 26.00 -11.54 42.59 4.55
ETFS East Texas Fin. Serv. of TX 15.88 1,539 24.4 16.25 11.50 16.00 -0.75 38.09 0.32
ESBK Elmira Svgs Bank (The) of NY* 29.00 755 21.9 32.25 18.33 29.63 -2.13 46.76 -3.33
EMLD Emerald Financial Corp. of OH 13.25 10,262 136.0 16.00 6.69 13.88 -4.54 96.30 19.80
EFBC Empire Federal Bancorp of MT 16.88 2,592 43.8 18.25 13.00 17.00 -0.71 26.16 -1.46
EFBI Enterprise Fed. Bancorp of OH 29.38 2,211 65.0 35.00 18.00 29.31 0.24 54.63 -6.73
EQSB Equitable FSB of Wheaton MD 31.00 1,218 37.8 34.00 17.00 33.75 -8.15 75.84 16.98
FCBF FCB Fin. Corp. of Neenah WI 32.75 3,863 126.5 34.00 24.00 32.00 2.34 33.67 11.02
FFDF FFD Financial Corp. of OH 23.50 1,445 34.0 23.75 13.38 23.25 1.08 77.36 30.56
FFLC FFLC Bancorp of Leesburg FL 20.03 3,747 75.1 23.50 16.05 19.75 1.42 18.17 -7.91
FFWC FFW Corporation of Wabash IN 17.25 1,450 25.0 21.50 13.00 18.50 -6.76 32.69 -9.21
FFYF FFY Financial Corp. of OH 32.50 4,055 131.8 35.38 25.50 34.75 -6.47 23.81 -1.90
FMCO FMS Financial Corp. of NJ 47.38 2,395 113.5 50.00 19.75 47.25 0.28 128.34 33.46
FFHH FSF Financial Corp. of MN 19.25 2,949 56.8 21.25 16.63 19.25 0.00 14.93 -8.07
FOBC Fed One Bancorp of Wheeling WV(8) 37.75 2,394 90.4 40.63 19.75 38.25 -1.31 88.75 37.27
FBCI Fidelity Bancorp of Chicago IL 23.75 2,822 67.0 26.00 18.50 24.00 -1.04 26.67 -7.34
FSBI Fidelity Bancorp, Inc. of PA 24.88 1,966 48.9 28.00 16.00 24.88 0.00 55.50 7.24
FFFL Fidelity Bcsh MHC of FL (47.7) 30.06 6,802 96.9 35.38 18.75 29.25 2.77 60.32 -7.51
FFED Fidelity Fed. Bancorp of IN 7.63 3,127 23.9 10.50 7.38 7.63 0.00 -1.55 -25.99
FFOH Fidelity Financial of OH 17.38 5,595 97.2 19.88 14.50 18.06 -3.77 20.86 12.13
FIBC Financial Bancorp, Inc. of NY 27.38 1,707 46.7 27.38 16.75 25.50 7.37 63.46 13.47
FBSI First Bancshares, Inc. of MO 13.38 2,211 29.6 17.50 9.50 13.75 -2.69 40.84 -14.40
FBBC First Bell Bancorp of PA 20.25 6,524 132.1 21.63 14.50 21.13 -4.16 37.29 6.58
SKBO First Carnegie MHC of PA(45.0) 19.88 2,300 20.6 21.00 13.13 20.00 -0.60 51.41 6.03
FSTC First Citizens Corp of GA 31.88 2,765 88.1 35.50 16.50 33.63 -5.20 85.67 -6.24
FCBK First Coastal Bankshares of VA(8) 17.94 4,982 89.4 17.94 0.40 17.94 0.00 ***.** ***.**
FCME First Coastal Corp. of ME* 13.56 1,359 18.4 15.75 8.88 13.63 -0.51 42.74 -8.87
FFBA First Colorado Bancorp of CO(8) 28.50 16,827 479.6 30.13 17.38 29.00 -1.72 61.66 20.00
FDEF First Defiance Fin.Corp. of OH 15.50 8,123 125.9 16.25 13.50 15.25 1.64 8.77 -3.13
FESX First Essex Bancorp of MA* 22.75 7,535 171.4 26.13 16.38 23.09 -1.47 39.48 -2.15
FFSX First FSB MHC Sxld of IA(46.1) 37.25 2,838 48.5 39.00 20.75 37.25 0.00 77.38 17.32
FFES First Fed of E. Hartford CT 37.00 2,713 100.4 42.25 24.63 38.63 -4.22 50.22 -0.67
BDJI First Fed. Bancorp. of MN 18.75 998 18.7 22.00 12.17 18.75 0.00 52.07 -14.77
FFBH First Fed. Bancshares of AR 27.75 4,896 135.9 30.25 18.88 27.44 1.13 46.98 16.84
FTFC First Fed. Capital Corp. of WI 34.75 9,258 321.7 35.75 19.83 34.88 -0.37 73.75 2.57
FFKY First Fed. Fin. Corp. of KY 27.50 4,133 113.7 28.13 18.25 27.63 -0.47 45.66 20.88
FFBZ First Federal Bancorp of OH 25.75 1,575 40.6 25.75 17.00 25.75 0.00 47.14 21.86
FFCH First Fin. Holdings Inc. of SC 23.13 13,587 314.3 27.00 13.25 23.56 -1.83 77.92 -12.91
FFHS First Franklin Corp. of OH 17.25 1,788 30.8 20.83 13.17 18.25 -5.48 27.78 -17.19
FGHC First Georgia Hold. Corp of GA 14.50 3,199 46.4 14.50 7.00 14.13 2.62 87.10 52.63
FSPG First Home Bancorp of NJ(8) 31.13 2,708 84.3 37.50 18.13 31.63 -1.58 68.27 3.32
FFSL First Independence Corp. of KS 14.13 956 13.5 15.63 10.88 14.00 0.93 25.27 0.93
FISB First Indiana Corp. of IN 24.25 12,737 308.9 30.00 16.98 25.00 -3.00 41.98 -3.81
FKFS First Keystone Fin. Corp of PA 19.00 2,413 45.8 21.75 11.16 20.13 -5.61 70.25 6.26
FLKY First Lancaster Bncshrs of KY 15.56 947 14.7 16.38 15.00 15.50 0.39 2.03 -2.38
FLFC First Liberty Fin. Corp. of GA 23.50 11,622 273.1 25.25 14.17 24.25 -3.09 66.90 10.17
CASH First Midwest Fin., Inc. of OH 24.25 2,646 64.2 24.88 15.00 23.38 3.72 56.45 7.78
FMBD First Mutual Bancorp Inc of IL 17.25 3,531 60.9 25.00 14.75 17.88 -3.52 15.00 -31.00
FMSB First Mutual SB of Bellevue WA* 17.13 4,166 71.4 20.17 11.50 16.50 3.82 37.92 -7.41
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FNGB First Northern Cap. Corp of WI 13.50 8,917 120.4 14.00 9.81 13.38 0.90 38.46 -3.57
FFPB First Palm Beach Bancorp of FL 43.81 5,058 221.6 44.94 29.25 37.50 16.83 49.78 1.58
FWWB First Savings Bancorp of WA 25.88 10,156 262.8 28.56 20.88 25.13 2.98 24.72 -5.89
FSFF First SecurityFed Fin of IL 16.75 6,408 107.3 17.25 14.50 17.25 -2.90 67.50 6.35
SHEN First Shenango Bancorp of PA(8) 43.50 2,069 90.0 46.25 24.00 44.00 -1.14 79.38 17.57
FSLA First Source Bancorp of NJ 10.13 31,740 321.5 13.93 5.52 10.06 0.70 89.70 -27.28
SOPN First Svgs Bancorp of NC 23.25 3,710 86.3 26.00 20.00 24.50 -5.10 18.08 -8.82
FBNW FirstBank Corp of Clarkston WA 21.13 1,984 41.9 23.50 15.50 21.75 -2.85 111.30 11.92
FFDB FirstFed Bancorp, Inc. of AL 24.50 1,155 28.3 25.50 16.53 25.00 -2.00 42.03 13.27
FSPT FirstSpartan Fin. Corp. of SC 45.81 4,430 202.9 47.25 35.00 46.00 -0.41 129.05 13.81
FLAG Flag Financial Corp of GA 23.00 3,049 70.1 23.00 12.25 22.63 1.63 80.39 6.98
FLGS Flagstar Bancorp, Inc of MI 23.88 13,670 326.4 28.38 15.00 25.88 -7.73 59.20 20.61
FFIC Flushing Fin. Corp. of NY* 27.13 7,828 212.4 28.00 18.88 27.00 0.48 43.70 13.61
FBHC Fort Bend Holding Corp. of TX(8) 23.00 1,668 38.4 28.00 13.25 26.00 -11.54 70.37 5.75
FTSB Fort Thomas Fin. Corp. of KY 15.25 1,474 22.5 15.75 10.13 15.38 -0.85 48.78 -0.85
FKKY Frankfort First Bancorp of KY 16.50 1,619 26.7 24.50 15.75 16.63 -0.78 -20.48 -6.41
FTNB Fulton Bancorp, Inc. of MO 19.88 1,701 33.8 26.50 19.25 21.50 -7.53 4.63 -10.17
GUPB GFSB Bancorp, Inc of Gallup NM 15.50 1,201 18.6 17.00 12.00 17.00 -8.82 34.78 10.09
GSLA GS Financial Corp. of LA 18.00 3,350 60.3 21.00 14.00 19.13 -5.91 26.32 -14.29
GOSB GSB Financial Corp. of NY* 17.75 2,248 39.9 18.94 14.25 17.63 0.68 77.50 -1.72
GBNK Gaston Fed Bncp MHC of NC(47.0) 16.75 4,497 35.4 18.06 16.25 16.75 0.00 67.50 67.50
GFCO Glenway Financial Corp. of OH 22.25 2,282 50.8 22.25 11.50 21.00 5.95 79.73 18.67
GTPS Great American Bancorp of IL 21.50 1,588 34.1 23.00 15.50 21.75 -1.15 36.51 13.16
PEDE Great Pee Dee Bancorp of SC 15.50 2,202 34.1 16.25 14.75 15.38 0.78 55.00 -3.91
GSBC Great Southern Bancorp of MO 25.91 8,036 208.2 26.38 16.00 25.75 0.62 53.50 5.76
GSFC Green Street Fin. Corp. of NC 16.38 4,298 70.4 20.75 16.25 16.25 0.80 -7.09 -10.25
GFED Guaranty Fed Bancshares of MO 13.25 6,226 82.5 14.44 8.67 13.00 1.92 50.57 2.87
HCBB HCB Bancshares of Camden AR 15.63 2,645 41.3 16.13 12.88 15.88 -1.57 20.23 7.79
HEMT HF Bancorp of Hemet CA 17.75 6,312 112.0 18.25 13.31 17.88 -0.73 29.09 1.43
HFFC HF Financial Corp. of SD 36.00 2,935 105.7 36.25 19.25 36.00 0.00 85.76 35.85
HFNC HFNC Financial Corp. of NC(8) 12.63 17,193 217.1 17.63 12.31 13.25 -4.68 -28.36 -12.90
HMNF HMN Financial, Inc. of MN 18.38 6,217 114.3 21.67 14.08 17.84 3.03 25.29 -15.18
HALL Hallmark Capital Corp. of WI 14.88 2,934 43.7 18.00 9.63 15.13 -1.65 54.52 -12.47
HRBF Harbor Federal Bancorp of MD 23.50 1,693 39.8 25.75 17.00 25.19 -6.71 30.56 -6.93
HARB Harbor Florida Bancshrs of FL 12.38 30,699 380.1 12.81 5.95 12.00 3.17 106.68 12.34
HFSA Hardin Bancorp of Hardin MO 19.38 824 16.0 19.75 14.63 19.63 -1.27 32.47 6.19
HARL Harleysville SB of PA 32.75 1,672 54.8 35.00 21.75 32.38 1.14 43.96 19.09
HFGI Harrington Fin. Group of IN 11.50 3,311 38.1 13.75 10.75 11.50 0.00 -2.13 -11.54
HARS Harris Fin. MHC of PA (24.3) 25.50 33,942 208.3 27.88 6.58 26.63 -4.24 282.31 28.27
HFFB Harrodsburg 1st Fin Bcrp of KY 16.88 1,947 32.9 18.00 14.75 16.94 -0.35 10.69 0.78
HHFC Harvest Home Fin. Corp. of OH 15.00 891 13.4 16.75 10.50 15.50 -3.23 36.36 -4.76
HAVN Haven Bancorp of Woodhaven NY 26.50 8,836 234.2 28.75 16.75 25.75 2.91 58.21 17.78
HTHR Hawthorne Fin. Corp. of CA 19.13 3,164 60.5 24.00 11.00 20.00 -4.35 71.88 -4.97
HMLK Hemlock Fed. Fin. Corp. of IL 18.88 2,000 37.8 19.00 12.88 18.88 0.00 42.49 10.22
HBSC Heritage Bancorp, Inc of SC 21.00 4,629 97.2 22.38 21.00 21.25 -1.18 40.00 40.00
HFWA Heritage Financial Corp of WA 15.25 9,755 148.8 15.94 13.00 15.13 0.79 52.50 52.50
HCBC High Country Bancorp of CO 15.25 1,323 20.2 15.50 14.44 15.00 1.67 52.50 -1.61
HBNK Highland Bancorp of CA 42.25 2,323 98.1 43.50 21.50 42.75 -1.17 106.10 29.01
HIFS Hingham Inst. for Sav. of MA* 36.75 1,304 47.9 37.00 18.25 35.25 4.26 97.26 27.83
HBEI Home Bancorp of Elgin IL(8) 17.38 6,856 119.2 19.31 15.75 17.38 0.00 8.62 -2.80
HBFW Home Bancorp of Fort Wayne IN 32.50 2,358 76.6 37.63 20.13 34.00 -4.41 61.45 10.17
HCFC Home City Fin. Corp. of OH 16.63 905 15.1 22.75 13.25 17.06 -2.52 24.29 -10.11
HOMF Home Fed Bancorp of Seymour IN 32.38 5,127 166.0 33.75 17.83 32.25 0.40 80.69 24.54
HWEN Home Financial Bancorp of IN 8.75 929 8.1 9.75 7.44 8.88 -1.46 16.67 -5.41
HLFC Home Loan Financial Corp of OH 15.75 2,248 35.4 16.75 15.25 15.88 -0.82 57.50 57.50
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
HPBC Home Port Bancorp, Inc. of MA* 25.00 1,842 46.1 27.63 19.25 24.38 2.54 26.58 8.08
HFBC HopFed Bancorp of KY 20.50 4,034 82.7 21.88 16.00 20.50 0.00 105.00 105.00
HZFS Horizon Fin'l. Services of IA 16.13 880 14.2 16.75 9.38 16.13 0.00 69.79 34.42
HRZB Horizon Financial Corp. of WA* 17.75 7,478 132.7 19.25 14.88 18.13 -2.10 16.39 0.00
IBSF IBS Financial Corp. of NJ(8) 18.75 10,960 205.5 21.19 14.88 19.13 -1.99 26.01 5.99
ITLA ITLA Capital Corp of CA* 22.63 7,700 174.3 24.00 15.00 23.50 -3.70 52.08 17.56
ICBC Independence Comm Bnk Cp of NY 17.38 70,411 1,223.7 19.13 16.94 17.56 -1.03 73.80 73.80
IFSB Independence FSB of DC 17.00 1,281 21.8 21.63 8.38 19.75 -13.92 102.86 0.00
INBI Industrial Bancorp of OH 20.94 5,078 106.3 25.00 12.25 21.63 -3.19 65.80 17.97
IWBK Interwest Bancorp of WA 45.63 8,419 384.2 45.63 34.00 44.63 2.24 31.31 20.87
IPSW Ipswich SB of Ipswich MA* 18.00 2,390 43.0 20.75 7.63 18.00 0.00 138.10 9.09
JXVL Jacksonville Bancorp of TX 20.88 2,444 51.0 23.25 14.50 21.06 -0.85 44.00 -10.19
JXSB Jcksnville SB,MHC of IL (45.6) 22.50 1,908 13.1 25.50 10.83 23.25 -3.23 98.59 12.50
JSBA Jefferson Svgs Bancorp of MO 31.75 10,020 318.1 31.88 14.13 30.00 5.83 122.81 54.88
JOAC Joachim Bancorp, Inc. of MO(8) 16.38 722 11.8 16.75 14.25 16.50 -0.73 10.08 2.37
KSBK KSB Bancorp of Kingfield ME* 18.63 1,259 23.5 22.50 9.17 19.00 -1.95 79.48 -17.20
KFBI Klamath First Bancorp of OR 19.81 9,970 197.5 24.25 18.38 21.00 -5.67 7.08 -7.86
LSBI LSB Fin. Corp. of Lafayette IN 31.75 916 29.1 33.00 19.41 33.00 -3.79 63.58 11.40
LVSB Lakeview Financial of NJ 23.50 3,882 91.2 26.56 14.50 24.00 -2.08 64.22 -7.84
LARK Landmark Bancshares, Inc of KS 27.00 1,665 45.0 29.25 19.50 27.00 0.00 38.46 8.52
LARL Laurel Capital Group of PA 20.50 2,187 44.8 23.50 14.00 21.00 -2.38 43.06 -5.40
LSBX Lawrence Savings Bank of MA* 16.13 4,316 69.6 19.31 9.88 16.19 -0.37 63.26 -1.53
LFED Leeds Fed Bksr MHC of MD (36.3) 20.25 5,182 38.1 23.50 11.83 20.50 -1.22 68.75 -6.90
LXMO Lexington B&L Fin. Corp. of MO 15.75 1,121 17.7 17.88 14.50 16.25 -3.08 6.78 -11.27
LFCO Life Financial Corp of CA(8) 19.50 6,547 127.7 25.38 10.75 20.56 -5.16 N.A. 54.39
LFBI Little Falls Bancorp of NJ 20.63 2,478 51.1 22.25 13.00 19.75 4.46 54.19 0.63
LOGN Logansport Fin. Corp. of IN 18.50 1,261 23.3 19.63 13.25 18.50 0.00 32.14 2.78
LISB Long Island Bancorp, Inc of NY(8) 61.78 23,934 1,478.6 67.63 34.63 63.13 -2.14 79.07 24.48
MAFB MAF Bancorp, Inc. of IL 37.75 15,030 567.4 43.25 27.33 38.31 -1.46 36.87 6.70
MBLF MBLA Financial Corp. of MO 24.13 1,251 30.2 30.63 20.75 24.13 0.00 16.29 -20.89
MECH MECH Financial Inc of CT* 29.88 5,294 158.2 31.50 17.38 30.00 -0.40 70.74 14.66
MFBC MFB Corp. of Mishawaka IN 27.00 1,652 44.6 30.38 19.00 26.00 3.85 39.32 -11.13
MSBF MSB Financial, Inc of MI 16.25 1,231 20.0 19.50 10.88 16.50 -1.52 49.36 -14.47
MARN Marion Capital Holdings of IN 28.25 1,774 50.1 29.50 22.00 28.94 -2.38 21.51 4.13
MRKF Market Fin. Corp. of OH 14.00 1,336 18.7 20.25 12.50 14.75 -5.08 13.09 -10.43
MFSL Maryland Fed. Bancorp of MD(8) 39.00 6,501 253.5 40.00 18.88 39.25 -0.64 106.57 11.43
MASB MassBank Corp. of Reading MA* 49.50 3,587 177.6 54.25 31.50 50.50 -1.98 58.10 3.93
MFLR Mayflower Co-Op. Bank of MA* 25.00 899 22.5 27.50 15.75 24.25 3.09 56.25 -6.54
MDBK Medford Bancorp, Inc. of MA* 42.50 4,540 193.0 44.25 27.00 42.75 -0.58 58.88 8.28
MWBX MetroWest Bank of MA* 7.69 14,220 109.4 9.50 5.31 7.94 -3.15 42.94 -14.56
METF Metropolitan Fin. Corp. of OH 15.63 7,051 110.2 18.88 6.69 15.25 2.49 135.75 0.84
MIFC Mid Iowa Financial Corp. of IA 11.75 1,724 20.3 12.75 8.50 11.75 0.00 38.24 2.17
MCBN Mid-Coast Bancorp of ME 11.50 712 8.2 14.00 6.50 12.00 -4.17 76.92 15.00
MWBI Midwest Bancshares, Inc. of IA 15.88 1,028 16.3 19.50 9.83 15.88 0.00 61.55 -12.99
MFFC Milton Fed. Fin. Corp. of OH 16.00 2,237 35.8 17.00 13.63 15.81 1.20 15.27 4.03
MBSP Mitchell Bancorp, Inc. of NC 16.75 931 15.6 18.00 16.25 16.75 0.00 0.72 -1.47
MBBC Monterey Bay Bancorp of CA 21.75 3,166 68.9 26.75 15.88 21.25 2.35 35.94 11.54
MONT Montgomery Fin. Corp. of IN 12.88 1,653 21.3 13.63 11.00 12.88 0.00 28.80 0.00
MSBK Mutual SB, FSB of Bay City MI 12.38 4,290 53.1 14.63 8.13 12.13 2.06 50.06 -4.77
MYST Mystic Financial of MA* 15.25 2,711 41.3 18.56 14.44 15.88 -3.97 52.50 52.50
NHTB NH Thrift Bancshares of NH 19.63 2,091 41.0 22.75 15.00 20.25 -3.06 34.18 -4.24
NSLB NS&L Bancorp, Inc of Neosho MO 17.50 686 12.0 19.50 16.50 17.75 -1.41 6.06 -7.31
NSSY NSS Bancorp of CT* 42.50 2,373 100.9 47.75 26.88 44.75 -5.03 53.15 12.58
NMSB Newmil Bancorp, Inc. of CT* 13.50 3,839 51.8 14.63 9.50 14.00 -3.57 40.19 3.85
NBCP Niagara Bancorp of NY MHC(45.4)* 15.88 29,756 214.4 17.00 15.88 16.31 -2.64 58.80 58.80
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NBSI North Bancshares of Chicago IL 16.94 1,280 21.7 18.83 12.83 17.00 -0.35 30.31 -5.26
FFFD North Central Bancshares of IA 21.50 3,266 70.2 24.88 15.13 22.69 -5.24 37.56 8.15
NEIB Northeast Indiana Bncrp of IN 22.00 1,689 37.2 22.75 14.75 21.63 1.71 41.94 -0.59
NWSB Northwest Bcrp MHC of PA (30.7) 16.25 46,838 233.2 18.00 7.13 17.75 -8.45 118.41 15.00
NWEQ Northwest Equity Corp. of WI 20.69 839 17.4 22.25 14.25 20.25 2.17 37.93 -0.29
NTMG Nutmeg FS&LA of CT 10.88 989 10.8 11.38 5.53 10.75 1.21 96.75 3.62
OHSL OHSL Financial Corp. of OH 16.75 2,490 41.7 18.38 11.63 17.38 -3.62 40.99 24.07
OCFC Ocean Fin. Corp. of NJ 19.25 15,534 299.0 20.00 15.56 19.13 0.63 21.76 3.33
OTFC Oregon Trail Fin. Corp. of OR 16.63 4,333 72.1 18.50 15.63 16.63 0.00 66.30 -4.32
OFCP Ottawa Financial Corp. of MI 29.13 5,317 154.9 34.00 18.86 29.00 0.45 53.48 -14.32
PFFB PFF Bancorp of Pomona CA 19.56 17,067 333.8 21.50 15.13 19.63 -0.36 28.26 -1.61
PSFI PS Financial of Chicago IL 13.75 2,074 28.5 22.38 13.50 14.00 -1.79 0.00 -38.56
PVFC PVF Capital Corp. of OH 26.50 2,660 70.5 28.25 16.36 27.75 -4.50 61.98 31.25
PBCI Pamrapo Bancorp, Inc. of NJ 28.50 2,843 81.0 29.00 19.75 28.63 -0.45 39.84 4.59
PFED Park Bancorp of Chicago IL 18.20 2,333 42.5 19.75 14.50 19.50 -6.67 25.52 -2.31
PVSA Parkvale Financial Corp of PA 31.75 5,150 163.5 34.25 21.40 32.38 -1.95 41.11 -7.30
PBHC Pathfinder BC MHC of NY (46.1)* 22.63 2,831 20.0 26.13 8.58 23.50 -3.70 156.29 13.15
PEEK Peekskill Fin. Corp. of NY 17.50 3,017 52.8 18.25 13.88 17.44 0.34 20.69 4.48
PFSB PennFed Fin. Services of NJ 17.50 9,647 168.8 19.00 12.06 17.63 -0.74 40.68 2.16
PWBK Pennwood Bancorp, Inc. of PA 14.75 734 10.8 17.44 11.06 14.88 -0.87 37.98 -0.41
PBKB People's Bancshares of MA* 26.38 3,309 87.3 27.75 12.81 26.13 0.96 102.92 15.96
TSBS Peoples Bancorp Inc of NJ* 10.06 36,237 364.5 11.83 4.97 10.31 -2.42 102.41 -14.96
PFDC Peoples Bancorp of Auburn IN 22.00 3,378 74.3 25.00 14.50 22.00 0.00 51.72 0.00
PBCT Peoples Bank, MHC of CT (40.1)* 38.13 64,083 932.4 41.13 23.50 38.81 -1.75 60.55 0.34
PFFC Peoples Fin. Corp. of OH 15.38 1,417 21.8 19.00 12.75 15.25 0.85 -0.77 1.65
PHBK Peoples Heritage Fin Grp of ME* 22.50 55,662 1,252.4 26.50 16.56 24.00 -6.25 37.11 -2.17
PSFC Peoples Sidney Fin. Corp of OH 20.50 1,785 36.6 20.50 12.88 19.25 6.49 54.72 14.65
PERM Permanent Bancorp, Inc. of IN 16.50 4,206 69.4 18.25 11.38 16.25 1.54 34.69 6.04
PMFI Perpetual Midwest Fin. of IA(8) 27.25 1,950 53.1 32.38 18.75 28.88 -5.64 41.56 -6.84
PCBC Perry Co. Fin. Corp. of MO 24.00 828 19.9 25.00 19.00 24.00 0.00 26.32 -0.54
PHFC Pittsburgh Home Fin Corp of PA 17.75 1,969 34.9 20.81 14.38 18.00 -1.39 22.41 -1.39
PFSL Pocahontas Bancorp of AR 9.94 6,669 66.3 11.43 4.47 10.00 -0.60 110.59 -10.13
PTRS Potters Financial Corp of OH 18.75 967 18.1 22.25 10.13 18.75 0.00 78.57 -6.25
PHSB Ppls Home SB, MHC of PA (45.0) 20.25 2,760 25.2 22.13 13.63 20.44 -0.93 102.50 7.26
PRBC Prestige Bancorp of PA 21.25 1,052 22.4 22.07 13.48 23.88 -11.01 57.64 22.20
PFNC Progress Financial Corp. of PA 19.50 4,201 81.9 22.75 8.33 19.50 0.00 127.54 18.18
PSBK Progressive Bank, Inc. of NY(8)* 41.13 3,856 158.6 44.50 25.88 41.88 -1.79 59.73 7.53
PROV Provident Fin. Holdings of CA 22.75 4,669 106.2 24.25 16.00 23.88 -4.73 41.66 3.98
PULB Pulaski Bk,SB MHC of MO (29.8)(8) 45.50 2,106 28.4 51.00 17.38 45.63 -0.28 158.08 45.00
PLSK Pulaski SB, MHC of NJ (46.0) 18.50 2,108 17.6 24.50 12.75 18.75 -1.33 45.10 -3.90
PULS Pulse Bancorp of S. River NJ 27.63 3,111 86.0 29.75 18.25 27.75 -0.43 51.40 5.74
QCFB QCF Bancorp of Virginia MN 30.25 1,365 41.3 31.75 20.38 30.25 0.00 48.43 1.68
QCBC Quaker City Bancorp of CA 22.13 4,665 103.2 25.00 15.80 25.00 -11.48 40.96 4.14
QCSB Queens County Bancorp of NY* 44.00 14,922 656.6 47.13 27.33 45.00 -2.22 61.00 8.64
RARB Raritan Bancorp of Raritan NJ* 29.00 2,388 69.3 29.25 19.50 29.00 0.00 46.24 3.57
REDF RedFed Bancorp of Redlands CA(8) 20.19 7,388 149.2 21.13 14.00 20.13 0.30 41.68 1.56
RELY Reliance Bancorp, Inc. of NY 38.19 9,628 367.7 42.25 24.38 37.38 2.17 52.39 4.26
RELI Reliance Bancshares Inc of WI 8.13 2,371 19.3 10.13 7.25 8.75 -7.09 0.00 -14.42
RCBK Richmond County Fin Corp of NY 19.00 26,424 502.1 19.75 15.69 18.88 0.64 90.00 90.00
RIVR River Valley Bancorp of IN 18.38 1,190 21.9 20.75 14.25 19.75 -6.94 24.61 -1.97
RVSB Riverview Bancorp of WA 16.75 6,154 103.1 19.13 7.49 18.25 -8.22 86.73 -5.63
RSLN Roslyn Bancorp, Inc. of NY* 23.53 42,822 1,007.6 30.50 17.38 27.72 -15.12 36.41 1.20
SCCB S. Carolina Comm. Bnshrs of SC 21.50 580 12.5 25.25 18.25 21.50 0.00 10.26 -4.44
SBFL SB Fngr Lakes MHC of NY (33.1) 20.00 3,570 23.6 24.75 7.69 19.25 3.90 160.08 25.00
SFED SFS Bancorp of Schenectady NY 22.00 1,208 26.6 27.25 16.50 22.13 -0.59 26.58 -18.15
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
---------------------------- -------------------------------------------
52 Week (1) % Change From
Shares Market ------------ ----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- -------- ------ ---------- ----- ----- ----- ----- ------ -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SGVB SGV Bancorp of W. Covina CA 17.75 2,345 41.6 19.38 12.88 18.25 -2.74 35.19 0.00
SISB SIS Bancorp, Inc. of MA* 41.88 6,970 291.9 44.50 27.63 42.44 -1.32 46.95 4.21
SWCB Sandwich Bancorp of MA(8)* 63.50 1,946 123.6 64.50 30.25 63.63 -0.20 108.20 44.32
SFSL Security First Corp. of OH(8) 24.13 7,555 182.3 27.88 14.00 25.50 -5.37 70.29 15.57
SKAN Skaneateles Bancorp Inc of NY* 17.25 1,440 24.8 22.25 12.33 18.63 -7.41 36.15 -22.05
SOBI Sobieski Bancorp of S. Bend IN 19.25 764 14.7 24.25 14.75 19.63 -1.94 30.51 -5.54
SOSA Somerset Savings Bank of MA(8)* 5.13 16,727 85.8 5.94 2.53 5.13 0.00 102.77 2.60
SSFC South Street Fin. Corp. of NC* 9.75 4,676 45.6 20.00 9.38 9.88 -1.32 -40.00 -48.68
SBAN SouthBanc Shares Inc. of SC(8) 19.88 1,509 14.0 23.76 9.29 20.88 -4.79 113.99 -6.49
SCBS Southern Commun. Bncshrs of AL 16.75 1,137 19.0 20.75 13.75 16.75 0.00 19.64 -8.22
SMBC Southern Missouri Bncrp of MO 21.56 1,605 34.6 23.25 17.00 21.00 2.67 26.82 5.17
SWBI Southwest Bancshares of IL(8) 31.75 2,788 88.5 34.25 19.00 32.81 -3.23 67.11 6.72
SVRN Sovereign Bancorp, Inc. of PA 17.69 132,925 2,351.4 22.19 10.94 18.44 -4.07 60.24 2.31
STFR St. Francis Cap. Corp. of WI 41.25 5,223 215.4 50.75 29.50 42.38 -2.67 39.83 -18.32
SPBC St. Paul Bancorp, Inc. of IL 25.25 34,311 866.4 28.50 21.17 24.31 3.87 23.65 -3.81
SFFC StateFed Financial Corp. of IA 14.38 1,563 22.5 15.00 9.25 14.75 -2.51 55.46 -2.51
SFIN Statewide Fin. Corp. of NJ 23.00 4,519 103.9 26.69 16.25 22.63 1.63 36.26 -4.17
STSA Sterling Financial Corp. of WA 26.25 7,596 199.4 27.63 17.50 25.88 1.43 41.89 20.69
SFSB SuburbFed Fin. Corp. of IL(8) 48.75 1,270 61.9 50.00 23.25 47.50 2.63 109.68 -2.50
ROSE T R Financial Corp. of NY* 44.75 17,530 784.5 44.75 20.25 38.88 15.10 119.58 34.59
THRD TF Financial Corp. of PA 26.38 3,189 84.1 30.00 17.38 26.50 -0.45 49.63 -12.07
TPNZ Tappan Zee Fin., Inc. of NY(8) 20.13 1,478 29.8 22.63 16.50 20.25 -0.59 16.70 7.36
TSBK Timberland Bancorp of WA 17.25 6,092 105.1 18.50 14.50 17.25 0.00 72.50 72.50
TRIC Tri-County Bancorp of WY 15.25 1,167 17.8 16.50 9.75 15.25 0.00 56.41 1.67
TWIN Twin City Bancorp, Inc. of TN 14.00 1,260 17.6 15.50 12.17 14.25 -1.75 12.00 -9.68
USAB USABancshares, Inc of PA* 14.00 1,502 21.0 15.50 6.56 14.38 -2.64 91.52 40.00
UCBC Union Community Bancorp of IN 14.69 3,042 44.7 15.81 13.94 14.94 -1.67 46.90 0.41
UFRM United FSB of Rocky Mount NC(8) 17.69 3,263 57.7 21.00 10.50 18.50 -4.38 62.59 -9.88
UBMT United Fin. Corp. of MT 29.50 1,223 36.1 31.50 19.00 29.50 0.00 50.28 15.69
UTBI United Tenn. Bancshares of TN 14.88 1,455 21.7 16.00 13.63 15.00 -0.80 48.80 48.80
WHGB WHG Bancshares of MD 16.75 1,389 23.3 19.00 13.75 16.81 -0.36 20.68 -10.67
WSFS WSFS Financial Corp. of DE* 21.25 12,464 264.9 23.88 12.75 21.25 0.00 68.25 6.25
WVFC WVS Financial Corp. of PA 18.75 3,616 67.8 20.13 11.88 19.31 -2.90 56.25 6.35
WRNB Warren Bancorp of Peabody MA* 12.38 7,664 94.9 14.38 8.44 12.38 0.00 48.98 7.65
WSBI Warwick Community Bncrp of NY* 17.00 6,607 112.3 18.00 15.38 16.88 0.71 70.00 -2.19
WFSL Washington Federal, Inc. of WA 27.81 52,405 1,457.4 30.29 22.56 29.38 -5.34 19.36 -2.69
WAMU Washington Mutual, Inc. of WA* 70.63 257,888 18,214.6 76.38 53.75 76.38 -7.53 31.09 10.69
WYNE Wayne Bancorp, Inc. of NJ 31.63 2,013 63.7 32.00 16.75 31.50 0.41 87.38 18.24
WAYN Wayne Svgs Bks MHC of OH (47.8) 27.25 2,484 29.3 30.00 15.46 27.50 -0.91 71.28 3.38
WCFB Wbstr Cty FSB MHC of IA (45.2) 19.63 2,112 18.6 22.00 14.00 20.25 -3.06 33.08 -1.85
WBST Webster Financial Corp. of CT 33.75 27,411 925.1 36.25 20.13 34.00 -0.74 70.89 1.50
WEFC Wells Fin. Corp. of Wells MN 21.00 1,959 41.1 22.00 14.00 20.63 1.79 50.00 17.45
WCBI WestCo Bancorp, Inc. of IL 30.38 2,462 74.8 30.50 23.25 30.25 0.43 30.67 11.49
WSTR WesterFed Fin. Corp. of MT 24.50 5,584 136.8 27.00 19.88 25.00 -2.00 23.24 -3.92
WOFC Western Ohio Fin. Corp. of OH 26.00 2,352 61.2 29.25 21.00 25.75 0.97 22.35 -3.27
WEHO Westwood Hmstd Fin Corp of OH 13.50 2,843 38.4 18.13 12.63 14.75 -8.47 1.89 -20.59
FFWD Wood Bancorp of OH 17.00 2,662 45.3 27.00 8.53 17.75 -4.23 99.30 -9.57
YFCB Yonkers Fin. Corp. of NY 18.38 3,016 55.4 22.00 14.63 18.75 -1.97 20.52 -4.52
YFED York Financial Corp. of PA 22.19 8,924 198.0 27.25 15.50 22.25 -0.27 43.16 -13.83
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(292) 1.05 0.99 14.11 13.63 128.63
NYSE Traded Companies(8) 2.50 2.10 20.31 19.90 281.77
AMEX Traded Companies(22) 0.80 0.76 13.82 13.51 108.48
NASDAQ Listed OTC Companies(261) 1.04 0.99 13.98 13.52 126.86
California Companies(19) 1.63 1.52 17.85 17.10 240.60
Florida Companies(6) 0.98 0.65 11.34 10.81 147.25
Mid-Atlantic Companies(58) 1.12 1.08 13.91 12.97 145.26
Mid-West Companies(134) 0.98 0.93 13.97 13.66 113.81
New England Companies(8) 1.05 1.15 13.65 13.08 185.62
North-West Companies(11) 1.08 0.97 13.92 13.50 110.52
South-East Companies(44) 0.94 0.89 13.68 13.45 99.65
South-West Companies(6) 1.34 1.33 13.93 13.33 191.37
Western Companies (Excl CA)(6) 0.90 0.90 16.07 15.35 94.98
Thrift Strategy(245) 0.99 0.95 14.11 13.68 117.29
Mortgage Banker Strategy(29) 1.39 1.32 14.92 13.84 208.03
Real Estate Strategy(8) 1.57 1.46 14.21 13.81 202.40
Diversified Strategy(7) 1.47 1.03 11.56 11.34 143.82
Retail Banking Strategy(3) 0.44 0.30 13.08 12.52 194.44
Companies Issuing Dividends(239) 1.10 1.04 14.23 13.73 128.79
Companies Without Dividends(53) 0.79 0.80 13.56 13.21 127.90
Equity/Assets less than 6%(21) 1.28 1.37 12.13 11.46 245.04
Equity/Assets 6-12%(133) 1.24 1.14 13.88 13.15 160.99
Equity/Assets greater than 12%(138) 0.84 0.80 14.61 14.39 82.02
Converted Last 3 Mths (no MHC)(11) 0.48 0.44 12.20 11.27 51.45
Actively Traded Companies(34) 1.62 1.68 15.51 14.84 187.86
Market Value Below $20 Million(43) 0.78 0.72 13.10 13.04 92.93
Holding Company Structure(267) 1.06 1.00 14.34 13.86 128.55
Assets Over $1 Billion(59) 1.54 1.49 15.24 13.90 207.24
Assets $500 Million-$1 Billion(40) 1.13 1.08 13.85 13.49 148.15
Assets $250-$500 Million(71) 1.07 1.00 14.32 13.89 126.83
Assets less than $250 Million(122) 0.79 0.74 13.57 13.42 88.79
Goodwill Companies(118) 1.22 1.15 14.22 13.09 161.41
Non-Goodwill Companies(174) 0.93 0.89 14.04 13.99 107.19
Acquirors of FSLIC Cases(8) 2.35 2.27 20.32 19.50 256.52
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(59) 1.30 1.26 13.63 13.15 137.82
NYSE Traded Companies(5) 1.48 1.45 20.33 18.50 135.55
AMEX Traded Companies(6) 1.17 0.99 12.84 12.42 111.53
NASDAQ Listed OTC Companies(48) 1.29 1.27 12.96 12.63 141.06
California Companies(1) 1.70 1.70 13.36 13.32 131.30
Mid-Atlantic Companies(21) 1.11 1.08 14.27 13.60 127.32
New England Companies(31) 1.47 1.38 13.34 12.95 146.58
North-West Companies(3) 1.16 1.50 12.90 12.44 185.84
South-East Companies(3) 0.88 0.91 13.11 12.92 76.72
Thrift Strategy(45) 1.28 1.22 14.20 13.78 129.99
Mortgage Banker Strategy(6) 1.32 1.23 11.44 10.87 145.79
Real Estate Strategy(3) 1.33 1.28 9.29 9.27 89.86
Diversified Strategy(5) 1.38 1.66 13.28 12.29 211.59
Companies Issuing Dividends(50) 1.35 1.31 13.67 13.13 145.31
Companies Without Dividends(9) 0.96 0.95 13.33 13.31 87.48
Equity/Assets less than 6%(5) 1.31 1.24 10.65 9.89 210.06
Equity/Assets 6-12%(37) 1.53 1.48 13.30 12.75 156.33
Equity/Assets greater than 12%(17) 0.86 0.85 15.11 14.88 81.73
Converted Last 3 Mths (no MHC)(2) 0.63 0.60 13.38 13.23 69.40
Actively Traded Companies(17) 1.80 1.70 16.31 15.54 183.96
Market Value Below $20 Million(1) 0.94 0.82 11.10 11.10 110.39
Holding Company Structure(47) 1.26 1.23 13.83 13.48 130.85
Assets Over $1 Billion(18) 1.55 1.59 15.89 14.83 170.70
Assets $500 Million-$1 Billion(14) 1.53 1.38 13.36 13.07 153.96
Assets $250-$500 Million(12) 1.12 1.07 12.08 11.82 110.73
Assets less than $250 Million(15) 1.00 0.96 12.48 12.38 111.46
Goodwill Companies(31) 1.38 1.33 13.78 12.83 158.48
Non-Goodwill Companies(27) 1.23 1.19 13.08 13.08 117.27
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(17) 0.63 0.59 9.77 9.49 89.53
BIF-Insured Thrifts(3) 0.90 0.63 11.35 10.30 105.92
NASDAQ Listed OTC Companies(20) 0.67 0.60 10.02 9.62 92.11
Florida Companies(2) 1.05 0.94 14.56 14.37 171.65
Mid-Atlantic Companies(10) 0.53 0.50 8.69 8.46 73.82
Mid-West Companies(5) 0.77 0.72 11.02 10.26 109.48
New England Companies(2) 0.94 0.60 10.87 9.93 96.33
South-East Companies(1) 0.43 0.43 8.56 8.56 38.07
Thrift Strategy(18) 0.63 0.60 10.10 9.80 90.64
Mortgage Banker Strategy(1) 0.55 0.45 5.41 4.86 66.59
Diversified Strategy(1) 1.49 0.80 13.18 11.29 142.78
Companies Issuing Dividends(16) 0.72 0.62 10.11 9.60 98.21
Companies Without Dividends(4) 0.51 0.51 9.69 9.69 69.24
Equity/Assets 6-12%(12) 0.76 0.64 9.95 9.32 109.20
Equity/Assets greater than 12%(8) 0.54 0.53 10.14 10.14 62.83
Holding Company Structure(3) 0.65 0.60 10.20 9.79 92.57
Assets Over $1 Billion(6) 0.75 0.60 9.57 9.02 101.76
Assets $500 Million-$1 Billion(2) 1.10 1.06 15.31 13.80 175.21
Assets $250-$500 Million(4) 0.58 0.55 8.57 8.57 78.50
Assets less than $250 Million(8) 0.54 0.50 9.72 9.54 67.89
Goodwill Companies(6) 0.89 0.71 9.80 8.54 120.92
Non-Goodwill Companies(14) 0.58 0.55 10.12 10.12 78.82
MHC Institutions(20) 0.67 0.60 10.02 9.62 92.11
MHC Converted Last 3 Months(3) 0.47 0.47 9.94 9.94 64.55
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by
public (non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
NYSE Traded Companies
- ---------------------
<S> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA(8) 3.64 3.43 27.07 19.91 496.82
BYS Bay State Bancorp of MA* 1.05 1.05 23.66 23.66 114.26
CFB Commercial Federal Corp. of NE 1.49 1.74 14.63 12.79 211.60
DME Dime Bancorp, Inc. of NY* 1.28 1.03 11.37 9.31 192.76
DSL Downey Financial Corp. of CA 1.80 1.84 15.88 15.70 209.01
FED FirstFed Fin. Corp. of CA 2.46 2.38 21.95 21.80 384.00
GSB Golden State Bancorp of CA(8) 2.04 2.21 18.85 17.01 312.29
GDW Golden West Fin. Corp. of CA 6.52 6.55 49.22 49.22 693.64
GPT GreenPoint Fin. Corp. of NY* 1.68 1.74 15.15 8.45 156.60
JSB JSB Financial, Inc. of NY* 2.97 2.64 35.96 35.96 154.92
OCN Ocwen Financial Corp. of FL 1.30 0.37 6.91 6.66 50.56
SIB Staten Island Bancorp of NY* 0.43 0.79 15.51 15.11 59.19
WES Westcorp Inc. of Orange CA 1.40 -0.28 13.26 13.23 141.78
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 1.14 1.07 17.49 17.49 113.98
ANE Alliance Bncp of New Eng of CT* 0.87 0.51 7.91 7.72 99.21
BKC American Bank of Waterbury CT* 1.77 1.48 12.62 12.23 139.99
BFD BostonFed Bancorp of MA 1.30 1.10 14.98 14.44 190.23
CNY Carver Bancorp, Inc. of NY -0.20 0.03 15.24 14.66 179.67
CBK Citizens First Fin.Corp. of IL 0.78 0.49 15.27 15.27 110.35
EFC EFC Bancorp Inc of IL 0.56 0.56 12.42 12.42 52.24
EBI Equality Bancorp, Inc. of MO 0.46 0.10 10.31 10.31 92.23
ESX Essex Bancorp of Norfolk VA(8) -0.20 -0.19 0.03 -0.14 182.29
FCB Falmouth Bancorp, Inc. of MA* 0.68 0.54 16.19 16.19 72.26
FAB FirstFed America Bancorp of MA 0.20 0.63 14.87 14.87 133.17
GAF GA Financial Corp. of PA 1.10 1.04 15.09 14.95 107.71
HBS Haywood Bancshares, Inc. of NC* 1.76 1.76 18.06 17.49 121.60
KNK Kankakee Bancorp, Inc. of IL 2.20 2.14 27.96 23.26 289.90
KYF Kentucky First Bancorp of KY 0.79 0.78 11.24 11.24 65.97
MBB MSB Bancorp of Middletown NY(8)* 0.80 1.11 21.92 11.66 269.12
NBN Northeast Bancorp of ME* 0.76 0.67 9.40 8.48 124.60
NEP Northeast PA Fin. Corp of PA 0.42 0.42 12.43 12.43 68.06
PDB Piedmont Bancorp, Inc. of NC 0.57 0.56 7.77 7.77 48.28
SSB Scotland Bancorp, Inc. of NC 0.50 0.50 7.91 7.91 32.02
SZB SouthFirst Bancshares of AL 0.69 0.65 16.75 16.34 166.27
SRN Southern Banc Company of AL 0.41 0.41 14.74 14.61 86.31
SSM Stone Street Bancorp of NC 0.78 0.78 16.51 16.51 58.99
TSH Teche Holding Company of LA 1.09 1.08 16.38 16.38 118.43
FTF Texarkana Fst. Fin. Corp of AR 1.77 1.74 15.99 15.99 105.05
THR Three Rivers Fin. Corp. of MI 1.00 0.95 15.91 15.86 118.17
WSB Washington SB, FSB of MD 0.46 0.33 5.23 5.23 60.31
WFI Winton Financial Corp. of OH 0.80 0.66 5.80 5.68 80.84
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 1.82 1.24 21.48 21.13 238.13
FBER 1st Bergen Bancorp of NJ 0.78 0.78 13.54 13.54 115.82
AFED AFSALA Bancorp, Inc. of NY(8) 0.89 0.89 14.58 14.58 116.41
ALBK ALBANK Fin. Corp. of Albany NY 3.42 3.38 28.54 22.32 318.17
AMFC AMB Financial Corp. of IN 1.05 0.60 15.54 15.54 110.17
ASBP ASB Financial Corp. of OH 0.66 0.65 10.68 10.68 70.28
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
ABBK Abington Bancorp of MA* 1.25 1.06 9.70 8.82 154.28
AABC Access Anytime Bancorp of NM 1.28 1.19 7.58 7.58 93.71
AFBC Advance Fin. Bancorp of WV 0.89 0.84 14.52 14.52 103.04
AFCB Affiliated Comm BC, Inc of MA(8) 1.84 1.76 17.62 17.54 173.34
ALBC Albion Banc Corp. of Albion NY 0.45 0.43 8.28 8.28 96.94
ABCL Alliance Bancorp, Inc. of IL 1.55 1.59 16.46 16.27 191.56
ALLB Alliance Bank MHC of PA (19.9) 0.62 0.62 8.93 8.93 83.33
AHCI Ambanc Holding Co., Inc. of NY* 0.60 0.48 14.27 14.27 122.08
ASBI Ameriana Bancorp of IN 1.16 0.99 13.90 13.64 119.46
ABCW Anchor Bancorp Wisconsin of WI 2.29 2.04 14.28 14.05 223.06
ANDB Andover Bancorp, Inc. of MA* 2.12 2.06 16.97 16.97 214.01
ASFC Astoria Financial Corp. of NY 2.74 2.52 32.88 23.27 413.24
AVND Avondale Fin. Corp. of IL -1.41 -1.01 13.87 13.87 182.51
BKCT Bancorp Connecticut of CT* 1.22 1.05 9.44 9.44 94.07
BPLS Bank Plus Corp. of CA 0.62 0.72 9.57 8.76 217.72
BNKU Bank United Corp. of TX 3.29 3.13 20.67 18.68 414.91
BWFC Bank West Fin. Corp. of MI 0.41 0.33 8.93 8.93 68.66
BANC BankAtlantic Bancorp of FL 0.81 0.35 6.58 5.51 106.88
BKUNA BankUnited Fin. Corp. of FL 0.42 0.32 9.43 8.18 215.09
BVCC Bay View Capital Corp. of CA 0.68 1.06 19.20 12.29 263.86
FSNJ Bayonne Banchsares of NJ 0.30 0.43 10.63 10.63 67.47
BFSB Bedford Bancshares, Inc. of VA 1.45 1.44 17.71 17.71 133.29
BFFC Big Foot Fin. Corp. of IL 0.44 0.38 15.24 15.24 83.36
BYFC Broadway Fin. Corp. of CA 0.69 0.48 15.08 15.08 148.83
BRKL Brookline Bncp MHC of MA(47.0) 0.39 0.39 8.56 8.56 49.88
CBES CBES Bancorp, Inc. of MO 1.17 0.97 17.63 17.63 123.86
CCFH CCF Holding Company of GA 0.18 -0.16 12.91 12.91 159.49
CFSB CFSB Bancorp of Lansing MI 1.36 1.24 7.95 7.95 102.94
CKFB CKF Bancorp of Danville KY 1.34 1.01 15.61 15.61 73.18
CNSB CNS Bancorp, Inc. of MO 0.54 0.50 14.63 14.63 59.28
CSBF CSB Financial Group Inc of IL 0.29 0.25 13.87 13.09 57.78
CBCI Calumet Bancorp of Chicago IL 3.25 3.26 27.30 27.30 156.09
CAFI Camco Fin. Corp. of OH 1.77 1.34 15.62 14.66 157.86
CMRN Cameron Fin. Corp. of MO 0.95 0.93 17.91 17.91 86.18
CAPS Capital Savings Bancorp of MO(8) 1.39 1.19 12.42 12.42 122.61
CFNC Carolina Fincorp of NC* 0.55 0.63 13.89 13.89 62.16
CASB Cascade Financial Corp. of WA 0.91 0.86 8.93 8.93 127.89
CATB Catskill Fin. Corp. of NY* 0.86 0.85 15.54 15.54 66.34
CAVB Cavalry Bancorp of TN 0.62 0.43 13.23 13.23 46.54
CNIT Cenit Bancorp of Norfolk VA 1.29 1.20 10.15 9.36 147.56
CEBK Central Co-Op. Bank of MA* 1.42 1.30 18.35 16.59 186.82
CENB Century Bancorp, Inc. of NC(8) 1.06 1.06 14.58 14.58 82.12
COFI Charter One Financial of OH 1.13 1.57 11.19 10.49 151.85
CVAL Chester Valley Bancorp of PA 1.52 1.38 13.64 13.64 157.38
CTZN CitFed Bancorp of Dayton OH(8) 2.21 2.24 16.89 15.56 270.00
CLAS Classic Bancshares, Inc. of KY 0.84 0.98 15.38 13.12 102.15
CBSA Coastal Bancorp of Houston TX 2.83 2.91 21.95 18.92 589.12
CFCP Coastal Fin. Corp. of SC 1.37 1.13 7.51 7.51 124.46
CMSB Commonwealth Bancorp Inc of PA 0.96 0.72 13.41 10.72 146.98
CMSV Commty. Svgs, MHC of FL (48.5) 1.03 0.95 16.11 16.11 149.14
CFTP Community Fed. Bancorp of MS 0.59 0.56 13.25 13.25 56.12
CFFC Community Fin. Corp. of VA 0.73 0.74 9.76 9.72 71.60
CIBI Community Inv. Bancorp of OH 1.02 1.02 12.56 12.56 114.31
COOP Cooperative Bancshares of NC 0.76 0.69 9.76 9.76 127.83
CRZY Crazy Woman Creek Bncorp of WY 0.77 0.78 15.23 15.23 64.59
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
DNFC D&N Financial Corp. of MI 1.63 1.45 11.13 11.03 204.44
DCBI Delphos Citizens Bancorp of OH 0.91 0.91 14.76 14.76 59.15
DIME Dime Community Bancorp of NY* 0.94 0.89 15.22 13.24 126.78
DIBK Dime Financial Corp. of CT(8)* 2.97 2.95 15.71 15.33 193.67
ESBF ESB Financial Corp of PA 1.02 1.01 11.83 10.56 164.41
EGLB Eagle BancGroup of IL 0.50 0.25 17.56 17.56 153.11
EBSI Eagle Bancshares of Tucker GA 0.96 0.97 12.80 12.80 163.40
ETFS East Texas Fin. Serv. of TX 0.45 0.41 13.70 13.70 78.59
ESBK Elmira Svgs Bank (The) of NY* 1.34 1.42 18.90 18.90 304.25
EMLD Emerald Financial Corp. of OH 0.64 0.59 4.96 4.89 60.01
EFBC Empire Federal Bancorp of MT 0.61 0.61 15.66 15.66 42.36
EFBI Enterprise Fed. Bancorp of OH 0.99 0.90 14.65 14.64 136.26
EQSB Equitable FSB of Wheaton MD 1.86 1.80 14.25 14.25 275.09
FCBF FCB Fin. Corp. of Neenah WI 1.25 0.92 18.97 18.97 134.59
FFDF FFD Financial Corp. of OH 1.09 0.49 15.43 15.43 69.28
FFLC FFLC Bancorp of Leesburg FL 1.01 0.95 13.86 13.86 109.06
FFWC FFW Corporation of Wabash IN 1.27 1.23 13.13 12.05 137.04
FFYF FFY Financial Corp. of OH 1.93 1.90 20.82 20.82 158.98
FMCO FMS Financial Corp. of NJ 2.25 2.24 16.60 16.44 279.17
FFHH FSF Financial Corp. of MN 1.10 1.06 14.49 14.49 139.39
FOBC Fed One Bancorp of Wheeling WV(8) 1.29 1.28 17.26 16.57 153.58
FBCI Fidelity Bancorp of Chicago IL 0.37 1.08 18.51 18.48 171.63
FSBI Fidelity Bancorp, Inc. of PA 1.42 1.40 14.01 14.01 204.94
FFFL Fidelity Bcsh MHC of FL (47.7) 1.07 0.92 13.01 12.62 194.16
FFED Fidelity Fed. Bancorp of IN -0.25 -0.19 4.28 4.28 63.14
FFOH Fidelity Financial of OH 0.87 0.84 11.64 10.31 96.59
FIBC Financial Bancorp, Inc. of NY 1.62 1.58 16.43 16.36 181.82
FBSI First Bancshares, Inc. of MO 0.83 0.79 10.80 10.35 80.48
FBBC First Bell Bancorp of PA 1.15 1.12 11.43 11.43 101.87
SKBO First Carnegie MHC of PA(45.0) 0.41 0.46 10.74 10.74 62.46
FSTC First Citizens Corp of GA 2.15 1.92 12.34 9.73 121.95
FCBK First Coastal Bankshares of VA(8) 0.85 0.65 8.96 8.96 125.50
FCME First Coastal Corp. of ME* 0.94 0.82 11.10 11.10 110.39
FFBA First Colorado Bancorp of CO(8) 1.18 1.12 12.44 12.19 92.43
FDEF First Defiance Fin.Corp. of OH 0.66 0.63 12.54 12.54 71.09
FESX First Essex Bancorp of MA* 1.36 1.24 12.09 10.66 171.64
FFSX First FSB MHC Sxld of IA(46.1) 1.16 1.17 14.51 11.48 201.27
FFES First Fed of E. Hartford CT 2.09 2.32 25.26 25.26 365.27
BDJI First Fed. Bancorp. of MN 0.77 0.77 12.35 12.35 113.39
FFBH First Fed. Bancshares of AR 1.11 1.05 17.20 17.20 116.50
FTFC First Fed. Capital Corp. of WI 1.99 1.51 12.24 11.61 170.70
FFKY First Fed. Fin. Corp. of KY 1.52 1.48 13.02 12.33 98.56
FFBZ First Federal Bancorp of OH 1.16 1.15 10.24 10.23 134.38
FFCH First Fin. Holdings Inc. of SC 1.12 1.08 8.70 8.70 136.76
FFHS First Franklin Corp. of OH 1.05 0.91 12.01 11.95 129.94
FGHC First Georgia Hold. Corp of GA 0.57 0.57 4.44 4.14 54.87
FSPG First Home Bancorp of NJ(8) 1.71 1.68 14.10 13.92 201.54
FFSL First Independence Corp. of KS 0.79 0.79 12.09 12.09 130.22
FISB First Indiana Corp. of IN 1.42 1.07 12.27 12.14 132.52
FKFS First Keystone Fin. Corp of PA 1.13 1.00 10.64 10.64 159.62
FLKY First Lancaster Bncshrs of KY 0.51 0.51 14.91 14.91 55.97
FLFC First Liberty Fin. Corp. of GA 0.82 0.85 8.33 7.57 109.74
CASH First Midwest Fin., Inc. of OH 0.88 0.77 15.92 14.16 153.22
FMBD First Mutual Bancorp Inc of IL 0.37 0.29 15.64 12.11 110.52
FMSB First Mutual SB of Bellevue WA* 1.05 1.03 7.35 7.35 108.29
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
FNGB First Northern Cap. Corp of WI 0.70 0.66 8.43 8.43 75.93
FFPB First Palm Beach Bancorp of FL 1.86 1.43 22.94 22.43 360.04
FWWB First Savings Bancorp of WA 1.26 1.19 14.97 13.87 111.92
FSFF First SecurityFed Fin of IL 0.28 0.55 14.34 14.29 49.29
SHEN First Shenango Bancorp of PA(8) 2.10 2.14 23.34 23.34 194.85
FSLA First Source Bancorp of NJ 0.41 0.41 7.72 7.72 37.57
SOPN First Svgs Bancorp of NC 1.40 1.40 18.61 18.61 80.81
FBNW FirstBank Corp of Clarkston WA 0.86 0.52 15.13 15.13 92.50
FFDB FirstFed Bancorp, Inc. of AL 1.48 1.48 15.00 13.77 154.80
FSPT FirstSpartan Fin. Corp. of SC 1.52 1.51 29.87 29.87 113.62
FLAG Flag Financial Corp of GA 0.67 0.46 7.24 7.24 81.33
FLGS Flagstar Bancorp, Inc of MI 1.83 1.83 9.77 9.46 187.56
FFIC Flushing Fin. Corp. of NY* 1.13 1.14 17.52 16.85 137.77
FBHC Fort Bend Holding Corp. of TX(8) 1.41 1.04 12.29 11.52 181.49
FTSB Fort Thomas Fin. Corp. of KY 0.82 0.82 10.87 10.87 68.93
FKKY Frankfort First Bancorp of KY 0.20 0.65 13.96 13.96 82.34
FTNB Fulton Bancorp, Inc. of MO 0.75 0.58 15.06 15.06 64.45
GUPB GFSB Bancorp, Inc of Gallup NM 0.79 0.79 12.14 12.14 98.40
GSLA GS Financial Corp. of LA 0.56 0.50 16.08 16.08 38.63
GOSB GSB Financial Corp. of NY* 0.39 0.37 14.88 14.88 52.87
GBNK Gaston Fed Bncp MHC of NC(47.0) 0.43 0.43 8.56 8.56 38.07
GFCO Glenway Financial Corp. of OH 1.11 1.10 12.60 12.49 131.66
GTPS Great American Bancorp of IL 0.58 0.58 16.88 16.88 92.09
PEDE Great Pee Dee Bancorp of SC 0.56 0.56 13.51 13.51 35.68
GSBC Great Southern Bancorp of MO 1.73 1.55 8.31 8.25 101.40
GSFC Green Street Fin. Corp. of NC 0.66 0.66 14.81 14.81 41.39
GFED Guaranty Fed Bancshares of MO 0.39 0.38 11.21 11.21 39.56
HCBB HCB Bancshares of Camden AR 0.22 0.22 14.45 13.94 77.48
HEMT HF Bancorp of Hemet CA -0.07 0.21 13.27 11.26 168.84
HFFC HF Financial Corp. of SD 2.11 1.97 18.89 18.89 194.35
HFNC HFNC Financial Corp. of NC(8) 0.70 0.48 9.82 9.82 56.97
HMNF HMN Financial, Inc. of MN 0.93 0.66 13.66 12.71 117.76
HALL Hallmark Capital Corp. of WI 0.95 0.90 11.02 11.02 143.47
HRBF Harbor Federal Bancorp of MD 0.99 0.95 17.32 17.32 136.53
HARB Harbor Florida Bancshrs of FL 0.47 0.45 8.29 8.20 41.84
HFSA Hardin Bancorp of Hardin MO 1.06 0.91 16.36 16.36 147.02
HARL Harleysville SB of PA 2.08 2.08 14.66 14.66 219.85
HFGI Harrington Fin. Group of IN -0.03 0.07 7.39 7.39 167.06
HARS Harris Fin. MHC of PA (24.3) 0.55 0.45 5.41 4.86 66.59
HFFB Harrodsburg 1st Fin Bcrp of KY 0.76 0.76 14.79 14.79 55.89
HHFC Harvest Home Fin. Corp. of OH 0.76 0.66 11.62 11.62 104.54
HAVN Haven Bancorp of Woodhaven NY 1.12 1.11 12.91 12.88 228.36
HTHR Hawthorne Fin. Corp. of CA 2.81 3.29 14.07 14.07 330.88
HMLK Hemlock Fed. Fin. Corp. of IL 0.85 0.85 15.47 15.47 95.51
HBSC Heritage Bancorp, Inc of SC 0.78 0.78 19.41 19.41 67.43
HFWA Heritage Financial Corp of WA 0.37 0.19 9.53 9.53 33.09
HCBC High Country Bancorp of CO 0.53 0.53 13.64 13.64 69.73
HBNK Highland Bancorp of CA 2.91 2.53 18.76 18.76 239.20
HIFS Hingham Inst. for Sav. of MA* 2.10 2.10 16.84 16.84 177.69
HBEI Home Bancorp of Elgin IL(8) 0.36 0.36 13.95 13.95 53.82
HBFW Home Bancorp of Fort Wayne IN 1.25 1.22 18.03 18.03 149.86
HCFC Home City Fin. Corp. of OH 1.02 1.02 15.68 15.68 84.39
HOMF Home Fed Bancorp of Seymour IN 1.95 1.58 12.65 12.31 137.54
HWEN Home Financial Bancorp of IN 0.42 0.33 8.03 8.03 44.64
HLFC Home Loan Financial Corp of OH 0.37 0.37 13.82 13.82 35.49
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
HPBC Home Port Bancorp, Inc. of MA* 1.63 1.81 11.98 11.98 122.53
HFBC HopFed Bancorp of KY 0.65 0.65 14.26 14.26 54.89
HZFS Horizon Fin'l. Services of IA 0.90 0.69 9.60 9.60 105.35
HRZB Horizon Financial Corp. of WA* 1.10 1.09 11.22 11.22 73.17
IBSF IBS Financial Corp. of NJ(8) 0.55 0.55 11.91 11.91 68.62
ITLA ITLA Capital Corp of CA* 1.70 1.70 13.36 13.32 131.30
ICBC Independence Comm Bnk Cp of NY 0.37 0.49 12.55 11.75 57.83
IFSB Independence FSB of DC 1.09 0.45 14.23 12.67 196.38
INBI Industrial Bancorp of OH 1.03 1.03 12.14 12.14 73.66
IWBK Interwest Bancorp of WA 2.40 2.03 16.79 16.53 248.37
IPSW Ipswich SB of Ipswich MA* 1.06 0.80 5.25 5.25 99.40
JXVL Jacksonville Bancorp of TX 1.37 1.37 14.29 14.29 97.01
JXSB Jcksnville SB,MHC of IL (45.6) 0.51 0.33 9.23 9.23 88.91
JSBA Jefferson Svgs Bancorp of MO 1.02 0.95 11.60 9.22 123.56
JOAC Joachim Bancorp, Inc. of MO(8) 0.37 0.37 13.71 13.71 47.41
KSBK KSB Bancorp of Kingfield ME* 1.20 1.20 8.75 8.32 118.87
KFBI Klamath First Bancorp of OR 0.85 0.85 14.97 13.74 99.72
LSBI LSB Fin. Corp. of Lafayette IN 1.81 1.62 19.85 19.85 235.88
LVSB Lakeview Financial of NJ 1.82 1.14 11.75 9.64 121.76
LARK Landmark Bancshares, Inc of KS 1.49 1.31 19.61 19.61 138.90
LARL Laurel Capital Group of PA 1.39 1.36 10.54 10.54 99.12
LSBX Lawrence Savings Bank of MA* 2.03 2.00 9.16 9.16 82.27
LFED Leeds Fed Bksr MHC of MD (36.3) 0.66 0.66 9.52 9.52 57.70
LXMO Lexington B&L Fin. Corp. of MO 0.62 0.62 15.19 14.25 84.31
LFCO Life Financial Corp of CA(8) 2.17 2.25 8.94 8.94 59.14
LFBI Little Falls Bancorp of NJ 0.75 0.72 14.63 13.51 143.44
LOGN Logansport Fin. Corp. of IN 1.00 1.02 13.31 13.31 70.58
LISB Long Island Bancorp, Inc of NY(8) 2.19 1.77 23.55 23.35 263.05
MAFB MAF Bancorp, Inc. of IL 2.52 2.45 18.08 16.04 233.61
MBLF MBLA Financial Corp. of MO 1.43 1.46 22.66 22.66 178.70
MECH MECH Financial Inc of CT* 2.49 2.49 17.14 17.14 178.69
MFBC MFB Corp. of Mishawaka IN 1.31 1.29 20.71 20.71 175.93
MSBF MSB Financial, Inc of MI 0.97 0.86 10.77 10.77 64.51
MARN Marion Capital Holdings of IN 1.37 1.37 22.30 21.83 108.53
MRKF Market Fin. Corp. of OH 0.48 0.48 15.25 15.25 43.23
MFSL Maryland Fed. Bancorp of MD(8) 1.14 1.60 16.07 15.91 183.36
MASB MassBank Corp. of Reading MA* 2.94 2.65 29.85 29.44 259.12
MFLR Mayflower Co-Op. Bank of MA* 1.56 1.48 14.31 14.10 146.73
MDBK Medford Bancorp, Inc. of MA* 2.60 2.45 22.79 21.54 246.77
MWBX MetroWest Bank of MA* 0.54 0.53 3.28 3.28 45.47
METF Metropolitan Fin. Corp. of OH 0.93 0.82 5.42 5.01 140.36
MIFC Mid Iowa Financial Corp. of IA 0.89 0.96 7.55 7.54 85.29
MCBN Mid-Coast Bancorp of ME 0.67 0.62 7.50 7.50 88.50
MWBI Midwest Bancshares, Inc. of IA 1.29 1.13 10.64 10.64 154.34
MFFC Milton Fed. Fin. Corp. of OH 0.63 0.56 11.50 11.50 101.35
MBSP Mitchell Bancorp, Inc. of NC 0.54 0.54 15.60 15.60 39.67
MBBC Monterey Bay Bancorp of CA 0.55 0.51 14.87 13.91 127.33
MONT Montgomery Fin. Corp. of IN 0.50 0.50 12.05 12.05 66.02
MSBK Mutual SB, FSB of Bay City MI -2.01 -0.71 7.76 7.76 153.06
MYST Mystic Financial of MA* 0.52 0.48 13.20 13.20 69.27
NHTB NH Thrift Bancshares of NH 1.36 1.26 12.41 10.78 153.32
NSLB NS&L Bancorp, Inc of Neosho MO 0.59 0.59 16.74 16.62 89.13
NSSY NSS Bancorp of CT* 2.83 3.20 22.87 22.26 281.78
NMSB Newmil Bancorp, Inc. of CT* 0.74 0.73 8.59 8.59 96.45
NBCP Niagara Bancorp of NY MHC(45.4)* 0.58 0.58 12.71 12.71 105.69
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
NBSI North Bancshares of Chicago IL 0.44 0.41 10.60 10.60 92.56
FFFD North Central Bancshares of IA 1.16 1.16 15.72 13.68 101.90
NEIB Northeast Indiana Bncrp of IN 1.33 1.33 15.82 15.82 118.59
NWSB Northwest Bcrp MHC of PA (30.7) 0.44 0.44 4.55 4.07 51.44
NWEQ Northwest Equity Corp. of WI 1.22 1.17 13.77 13.77 118.66
NTMG Nutmeg FS&LA of CT 0.57 0.40 6.58 6.58 112.78
OHSL OHSL Financial Corp. of OH 0.82 0.76 10.64 10.64 100.87
OCFC Ocean Fin. Corp. of NJ 0.90 0.90 13.90 13.90 97.75
OTFC Oregon Trail Fin. Corp. of OR 0.68 0.69 15.34 15.34 59.32
OFCP Ottawa Financial Corp. of MI 1.44 1.33 14.55 11.92 172.18
PFFB PFF Bancorp of Pomona CA 0.94 0.88 14.90 14.75 164.78
PSFI PS Financial of Chicago IL 0.44 0.74 11.24 11.24 40.42
PVFC PVF Capital Corp. of OH 1.94 1.83 11.34 11.34 157.49
PBCI Pamrapo Bancorp, Inc. of NJ 1.73 1.67 17.20 17.11 134.17
PFED Park Bancorp of Chicago IL 0.69 0.74 16.84 16.84 84.59
PVSA Parkvale Financial Corp of PA 2.11 2.11 16.02 15.94 204.95
PBHC Pathfinder BC MHC of NY (46.1)* 0.62 0.50 8.15 6.91 69.30
PEEK Peekskill Fin. Corp. of NY 0.63 0.65 14.92 14.92 64.91
PFSB PennFed Fin. Services of NJ 1.15 1.12 10.96 9.50 152.28
PWBK Pennwood Bancorp, Inc. of PA 0.50 0.60 11.59 11.59 63.21
PBKB People's Bancshares of MA* 1.59 0.70 9.56 9.23 260.50
TSBS Peoples Bancorp Inc of NJ* 0.20 0.15 3.09 2.80 24.53
PFDC Peoples Bancorp of Auburn IN 1.29 1.29 13.43 13.43 89.00
PBCT Peoples Bank, MHC of CT (40.1)* 1.49 0.80 13.18 11.29 142.78
PFFC Peoples Fin. Corp. of OH 0.75 0.29 11.11 11.11 58.02
PHBK Peoples Heritage Fin Grp of ME* 1.37 1.36 8.82 6.71 131.32
PSFC Peoples Sidney Fin. Corp of OH 0.71 0.71 14.87 14.87 59.12
PERM Permanent Bancorp, Inc. of IN 0.63 0.62 9.98 9.86 99.81
PMFI Perpetual Midwest Fin. of IA(8) 1.09 0.99 18.54 18.54 206.13
PCBC Perry Co. Fin. Corp. of MO 1.04 1.03 19.69 19.69 103.96
PHFC Pittsburgh Home Fin Corp of PA 1.12 0.95 12.77 12.62 171.82
PFSL Pocahontas Bancorp of AR 0.36 0.35 8.72 8.72 60.08
PTRS Potters Financial Corp of OH 1.01 0.98 11.40 11.40 130.90
PHSB Ppls Home SB, MHC of PA (45.0) 0.63 0.56 10.33 10.33 80.94
PRBC Prestige Bancorp of PA 0.70 0.68 15.00 15.00 152.64
PFNC Progress Financial Corp. of PA 0.89 0.80 6.37 5.65 115.40
PSBK Progressive Bank, Inc. of NY(8)* 2.22 2.23 20.68 18.87 232.39
PROV Provident Fin. Holdings of CA 1.06 0.52 18.16 18.16 163.75
PULB Pulaski Bk,SB MHC of MO (29.8)(8) 0.91 0.78 11.49 11.49 85.70
PLSK Pulaski SB, MHC of NJ (46.0) 0.55 0.55 10.44 10.44 90.50
PULS Pulse Bancorp of S. River NJ 1.81 1.83 14.47 14.47 173.58
QCFB QCF Bancorp of Virginia MN 1.82 1.82 19.65 19.65 111.84
QCBC Quaker City Bancorp of CA 1.35 1.31 16.14 16.14 184.35
QCSB Queens County Bancorp of NY* 1.50 1.48 11.36 11.36 108.73
RARB Raritan Bancorp of Raritan NJ* 1.65 1.62 13.22 13.05 175.38
REDF RedFed Bancorp of Redlands CA(8) 1.53 1.58 12.00 11.96 139.90
RELY Reliance Bancorp, Inc. of NY 1.93 2.04 20.13 13.89 226.40
RELI Reliance Bancshares Inc of WI 0.20 0.20 9.31 9.31 18.63
RCBK Richmond County Fin Corp of NY 0.09 0.74 12.21 12.16 55.40
RIVR River Valley Bancorp of IN 1.10 0.92 15.12 14.91 115.17
RVSB Riverview Bancorp of WA 0.64 0.61 9.93 9.60 44.39
RSLN Roslyn Bancorp, Inc. of NY* 1.03 0.99 14.51 14.44 86.55
SCCB S. Carolina Comm. Bnshrs of SC 0.80 0.80 16.27 16.27 79.84
SBFL SB Fngr Lakes MHC of NY (33.1) 0.26 0.22 6.10 6.10 70.26
SFED SFS Bancorp of Schenectady NY 0.92 0.89 17.95 17.95 145.22
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Current Per Share Financials
-------------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------ ------ -------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
SGVB SGV Bancorp of W. Covina CA 0.66 0.75 13.49 13.31 171.03
SISB SIS Bancorp, Inc. of MA* 1.55 2.00 18.39 18.39 257.38
SWCB Sandwich Bancorp of MA(8)* 2.57 2.47 21.87 21.18 270.57
SFSL Security First Corp. of OH(8) 1.23 1.23 8.56 8.44 90.73
SKAN Skaneateles Bancorp Inc of NY* 1.12 1.09 12.48 12.16 178.89
SOBI Sobieski Bancorp of S. Bend IN 0.64 0.64 16.58 16.58 117.60
SOSA Somerset Savings Bank of MA(8)* 0.46 0.44 2.31 2.31 31.87
SSFC South Street Fin. Corp. of NC* 0.32 0.33 7.37 7.37 46.40
SBAN SouthBanc Shares Inc. of SC(8) 0.73 0.73 17.01 17.01 77.85
SCBS Southern Commun. Bncshrs of AL 0.70 0.70 12.73 12.73 62.34
SMBC Southern Missouri Bncrp of MO 0.70 0.66 16.45 16.45 98.09
SWBI Southwest Bancshares of IL(8) 1.54 1.51 16.38 16.38 140.95
SVRN Sovereign Bancorp, Inc. of PA 0.46 0.70 6.70 5.75 136.14
STFR St. Francis Cap. Corp. of WI 2.48 2.39 25.25 22.56 315.50
SPBC St. Paul Bancorp, Inc. of IL 1.44 1.41 12.48 12.43 133.58
SFFC StateFed Financial Corp. of IA 0.70 0.70 10.16 10.16 57.31
SFIN Statewide Fin. Corp. of NJ 1.22 1.21 14.59 14.56 148.39
STSA Sterling Financial Corp. of WA 1.26 1.10 13.93 12.98 248.58
SFSB SuburbFed Fin. Corp. of IL(8) 2.15 1.64 23.65 23.58 351.56
ROSE T R Financial Corp. of NY* 2.09 1.85 14.05 14.05 228.51
THRD TF Financial Corp. of PA 1.47 1.24 15.99 13.46 200.52
TPNZ Tappan Zee Fin., Inc. of NY(8) 0.70 0.67 14.56 14.56 85.57
TSBK Timberland Bancorp of WA 0.63 0.60 13.79 13.79 42.92
TRIC Tri-County Bancorp of WY 0.77 0.80 12.03 12.03 76.49
TWIN Twin City Bancorp, Inc. of TN 0.88 0.73 11.17 11.17 87.59
USAB USABancshares, Inc of PA* 0.09 0.16 8.53 8.48 68.27
UCBC Union Community Bancorp of IN 0.47 0.47 14.22 14.22 35.53
UFRM United FSB of Rocky Mount NC(8) 0.54 0.35 7.02 7.02 93.67
UBMT United Fin. Corp. of MT 1.11 1.11 20.16 20.16 78.71
UTBI United Tenn. Bancshares of TN 0.57 0.57 13.92 13.92 51.58
WHGB WHG Bancshares of MD 0.54 0.55 14.34 14.34 72.95
WSFS WSFS Financial Corp. of DE* 1.31 1.30 6.96 6.92 121.57
WVFC WVS Financial Corp. of PA 1.03 1.04 8.61 8.61 80.76
WRNB Warren Bancorp of Peabody MA* 0.95 0.85 5.22 5.22 48.41
WSBI Warwick Community Bncrp of NY* 0.55 0.55 12.60 12.60 53.02
WFSL Washington Federal, Inc. of WA 2.06 2.04 14.06 12.97 109.02
WAMU Washington Mutual, Inc. of WA* 1.33 2.38 20.13 18.75 376.06
WYNE Wayne Bancorp, Inc. of NJ 0.97 0.97 16.86 16.86 134.15
WAYN Wayne Svgs Bks MHC of OH (47.8) 0.76 0.71 9.74 9.74 102.71
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.65 0.65 10.58 10.58 45.04
WBST Webster Financial Corp. of CT 1.15 1.75 13.94 12.16 256.09
WEFC Wells Fin. Corp. of Wells MN 1.13 1.10 15.13 15.13 102.83
WCBI WestCo Bancorp, Inc. of IL 1.91 1.78 19.73 19.73 128.33
WSTR WesterFed Fin. Corp. of MT 1.30 1.26 19.28 15.67 185.37
WOFC Western Ohio Fin. Corp. of OH 0.06 0.14 23.21 21.69 158.16
WEHO Westwood Hmstd Fin Corp of OH 0.31 0.49 10.60 10.60 47.22
FFWD Wood Bancorp of OH 0.89 0.76 8.18 8.18 61.99
YFCB Yonkers Fin. Corp. of NY 1.03 1.01 14.90 14.90 110.01
YFED York Financial Corp. of PA 1.25 1.04 11.74 11.74 132.48
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(292) 13.94 13.60 0.93 8.04 4.55 0.88 7.57 0.65 138.35 0.79
NYSE Traded Companies(8) 8.39 8.14 1.19 14.78 6.31 0.67 9.80 0.83 122.24 1.35
AMEX Traded Companies(22) 14.52 14.38 0.87 6.21 4.29 0.83 5.68 0.46 179.35 0.73
NASDAQ Listed OTC Companies(261) 13.96 13.69 0.93 8.05 4.53 0.89 7.71 0.66 135.72 0.79
California Companies(19) 8.00 7.65 0.65 9.01 5.58 0.56 8.35 1.41 96.13 1.26
Florida Companies(6) 10.52 10.11 1.13 12.53 4.44 0.66 7.23 0.59 102.85 0.76
Mid-Atlantic Companies(58) 11.31 10.58 0.82 8.34 4.69 0.81 8.13 0.75 107.46 0.93
Mid-West Companies(134) 14.59 14.36 0.95 7.47 4.39 0.91 7.13 0.56 144.07 0.68
New England Companies(8) 7.69 7.39 0.60 8.35 4.80 0.64 8.97 0.45 194.08 1.01
North-West Companies(11) 18.25 17.91 1.16 9.70 4.47 1.03 8.67 0.68 249.01 0.76
South-East Companies(44) 17.70 17.54 1.09 7.84 4.26 1.03 7.32 0.62 133.35 0.79
South-West Companies(6) 11.26 11.16 0.98 10.39 6.50 0.95 10.16 0.45 117.24 0.59
Western Companies (Excl CA)(6) 18.98 18.59 1.05 6.07 4.37 1.06 6.09 0.35 222.05 0.88
Thrift Strategy(245) 14.99 14.67 0.96 7.62 4.58 0.92 7.29 0.62 139.17 0.74
Mortgage Banker Strategy(29) 7.67 7.11 0.72 9.56 3.91 0.67 9.16 0.73 143.92 0.93
Real Estate Strategy(8) 7.35 7.11 0.85 11.94 5.52 0.78 11.07 1.26 106.47 1.62
Diversified Strategy(7) 8.81 8.62 1.29 15.24 6.00 0.77 10.20 0.61 161.89 1.07
Retail Banking Strategy(3) 6.76 6.48 0.21 4.77 1.64 0.15 3.51 1.04 67.45 1.16
Companies Issuing Dividends(239) 13.68 13.39 0.97 8.32 4.75 0.91 7.77 0.61 142.41 0.77
Companies Without Dividends(53) 15.10 14.59 0.79 6.78 3.66 0.76 6.68 0.84 118.60 0.88
Equity/Assets less than 6%(21) 5.03 4.77 0.53 10.80 4.20 0.59 11.79 1.07 95.39 0.93
Equity/Assets 6-12%(133) 8.87 8.49 0.83 9.57 4.96 0.75 8.71 0.69 138.41 0.90
Equity/Assets greater than 12%(138) 19.85 19.55 1.09 6.25 4.22 1.04 5.91 0.56 144.64 0.67
Converted Last 3 Mths (no MHC)(11) 24.30 22.37 1.01 5.53 3.19 0.92 5.13 0.38 128.91 0.81
Actively Traded Companies(34) 9.61 9.29 1.00 11.11 4.82 1.02 11.87 0.85 157.00 0.97
Market Value Below $20 Million(43) 16.64 16.56 0.93 6.28 4.86 0.87 5.77 0.64 104.11 0.66
Holding Company Structure(267) 14.20 13.87 0.94 7.96 4.57 0.89 7.50 0.67 136.04 0.78
Assets Over $1 Billion(59) 8.78 8.16 0.85 11.14 5.08 0.81 10.59 0.83 122.15 0.99
Assets $500 Million-$1 Billion(40) 10.10 9.85 0.86 8.84 4.02 0.81 8.54 0.58 160.79 0.87
Assets $250-$500 Million(71) 13.17 12.86 0.94 8.33 4.71 0.88 7.77 0.66 162.69 0.82
Assets less than $250 Million(122) 17.80 17.56 0.99 6.27 4.39 0.93 5.83 0.59 125.54 0.67
Goodwill Companies(118) 10.26 9.59 0.87 9.69 4.83 0.81 9.04 0.70 122.09 0.88
Non-Goodwill Companies(174) 16.34 16.23 0.98 6.96 4.36 0.93 6.61 0.62 149.38 0.73
Acquirors of FSLIC Cases(8) 8.90 8.40 1.00 11.89 5.94 0.95 11.29 0.89 56.32 0.59
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by c
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(59) 11.59 11.27 1.06 10.88 5.19 1.03 10.39 0.64 176.93 1.29
NYSE Traded Companies(5) 17.14 15.93 1.10 8.28 3.84 1.18 8.51 1.35 65.41 1.00
AMEX Traded Companies(6) 12.36 12.02 1.07 10.24 5.46 0.90 8.34 1.05 84.96 1.20
NASDAQ Listed OTC Companies(48) 10.87 10.66 1.06 11.24 5.32 1.02 10.84 0.53 194.54 1.33
California Companies(1) 10.18 10.14 1.43 13.51 7.51 1.43 13.51 1.31 102.95 1.63
Mid-Atlantic Companies(21) 13.77 13.26 0.96 8.49 3.91 0.95 8.34 0.75 130.00 1.17
New England Companies(31) 9.77 9.53 1.13 12.86 6.08 1.05 11.74 0.61 200.19 1.47
North-West Companies(3) 9.16 9.04 1.03 11.76 4.74 1.16 14.24 0.31 399.42 1.01
South-East Companies(3) 17.69 17.54 1.01 5.73 4.71 1.06 5.96 0.25 148.78 0.51
Thrift Strategy(45) 12.73 12.43 1.06 10.01 5.05 1.02 9.32 0.62 166.83 1.20
Mortgage Banker Strategy(6) 8.50 8.16 1.01 12.66 5.74 0.95 11.77 0.41 304.65 1.20
Real Estate Strategy(3) 10.48 10.46 1.72 16.49 7.59 1.61 15.47 1.16 105.13 1.63
Diversified Strategy(5) 6.40 5.83 0.88 13.62 4.76 0.98 15.48 0.81 150.64 1.95
Companies Issuing Dividends(50) 10.84 10.47 1.06 11.17 5.18 1.02 10.62 0.65 175.94 1.28
Companies Without Dividends(9) 16.64 16.62 1.09 8.87 5.25 1.09 8.86 0.55 182.73 1.29
Equity/Assets less than 6%(5) 5.19 4.87 0.87 16.45 4.87 0.77 14.50 0.88 92.00 1.34
Equity/Assets 6-12%(37) 8.69 8.34 1.11 12.75 6.05 1.06 12.19 0.76 198.42 1.46
Equity/Assets greater than 12%(17) 18.94 18.67 1.03 5.72 3.68 1.03 5.81 0.34 162.76 0.95
Converted Last 3 Mths (no MHC)(2) 16.65 16.06 0.99 5.56 2.83 0.86 4.73 0.71 86.68 0.98
Actively Traded Companies(17) 9.79 9.39 1.24 13.44 6.06 1.17 12.61 0.52 166.61 1.09
Market Value Below $20 Million(1) 10.06 10.06 0.85 8.88 6.93 0.74 7.75 0.50 358.51 2.48
Holding Company Structure(47) 12.61 12.36 1.07 10.25 5.09 1.04 9.84 0.53 177.25 1.27
Assets Over $1 Billion(18) 10.73 10.05 1.06 11.30 4.65 1.10 11.70 0.80 154.38 1.39
Assets $500 Million-$1 Billion(14) 9.50 9.25 1.11 12.19 5.86 0.99 10.56 0.62 159.32 1.26
Assets $250-$500 Million(12) 12.29 12.12 1.18 11.36 5.94 1.12 10.77 0.66 207.44 1.46
Assets less than $250 Million(15) 13.40 13.32 0.94 9.13 4.77 0.89 8.49 0.45 189.72 1.04
Goodwill Companies(31) 9.74 9.10 0.96 11.01 5.11 0.93 10.49 0.83 148.87 1.29
Non-Goodwill Companies(27) 13.16 13.16 1.17 10.98 5.34 1.13 10.52 0.44 209.12 1.29
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by c
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(17) 12.63 12.41 0.82 6.90 2.64 0.78 6.46 0.55 125.92 0.88
BIF-Insured Thrifts(3) 11.01 9.97 0.88 8.58 3.43 0.64 6.01 0.75 139.39 1.19
NASDAQ Listed OTC Companies(20) 12.37 12.03 0.83 7.16 2.76 0.76 6.39 0.59 128.30 0.93
Florida Companies(2) 8.75 8.65 0.70 7.55 3.24 0.62 6.70 0.29 105.15 0.46
Mid-Atlantic Companies(10) 11.81 11.46 0.78 6.98 2.57 0.73 6.54 0.72 99.39 0.90
Mid-West Companies(5) 12.64 12.26 0.87 7.05 2.87 0.81 6.44 0.45 176.48 0.64
New England Companies(2) 13.20 12.53 0.98 9.00 3.11 0.71 5.88 0.64 206.44 2.03
South-East Companies(1) 22.48 22.48 1.13 5.02 2.57 1.13 5.02 0.32 134.01 0.92
Thrift Strategy(18) 12.81 12.55 0.80 6.57 2.73 0.76 6.19 0.58 130.22 0.88
Mortgage Banker Strategy(1) 8.12 7.30 0.88 10.93 2.16 0.72 8.95 0.66 60.87 0.99
Diversified Strategy(1) 9.23 7.91 1.18 13.44 3.91 0.63 7.21 0.66 166.94 1.76
Companies Issuing Dividends(16) 11.51 11.07 0.83 7.66 2.81 0.74 6.67 0.57 118.62 0.82
Companies Without Dividends(4) 15.60 15.60 0.82 5.31 2.58 0.82 5.31 0.64 159.77 1.34
Equity/Assets 6-12%(12) 9.46 8.91 0.76 8.06 2.68 0.65 6.84 0.68 92.57 0.85
Equity/Assets greater than 12%(8) 17.37 17.37 0.94 5.63 2.90 0.93 5.60 0.41 193.81 1.07
Holding Company Structure(3) 11.09 10.49 0.73 6.78 3.06 0.66 6.10 0.79 125.62 0.90
Assets Over $1 Billion(6) 10.35 9.80 0.83 8.69 3.05 0.70 7.12 0.53 142.65 1.22
Assets $500 Million-$1 Billion(2) 9.01 8.25 0.71 7.44 3.01 0.68 7.22 0.31 128.55 0.58
Assets $250-$500 Million(4) 11.35 11.35 0.78 6.68 2.28 0.76 6.38 0.83 106.24 0.75
Assets less than $250 Million(8) 15.66 15.40 0.88 6.05 2.72 0.82 5.52 0.64 122.24 0.86
Goodwill Companies(6) 8.65 7.55 0.88 9.85 3.03 0.72 8.04 0.67 91.51 0.88
Non-Goodwill Companies(14) 14.09 14.09 0.80 5.93 2.64 0.77 5.62 0.54 148.37 0.96
MHC Institutions(20) 12.37 12.03 0.83 7.16 2.76 0.76 6.39 0.59 128.30 0.93
MHC Converted Last 3 Months(3) 17.22 17.22 0.82 4.71 2.85 0.82 4.71 0.40 199.04 1.44
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by c
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NYSE Traded Companies
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA(8) 5.45 4.01 0.82 18.69 4.77 0.77 17.61 2.14 41.19 1.32
BYS Bay State Bancorp of MA* 20.71 20.71 0.92 4.44 3.67 0.92 4.44 0.77 110.27 1.10
CFB Commercial Federal Corp. of NE 6.91 6.04 0.81 12.90 4.47 0.95 15.06 0.83 79.52 0.88
DME Dime Bancorp, Inc. of NY* 5.90 4.83 0.72 12.65 4.39 0.58 10.18 1.03 48.09 0.66
DSL Downey Financial Corp. of CA 7.60 7.51 0.87 12.02 5.43 0.89 12.29 0.85 63.98 0.59
FED FirstFed Fin. Corp. of CA 5.72 5.68 0.63 12.23 5.01 0.61 11.83 0.89 236.92 2.68
GSB Golden State Bancorp of CA(8) 6.04 5.45 0.66 11.61 5.32 0.72 12.58 0.99 92.79 1.22
GDW Golden West Fin. Corp. of CA 7.10 7.10 0.95 14.35 6.04 0.96 14.41 1.02 58.45 0.72
GPT GreenPoint Fin. Corp. of NY* 9.67 5.40 1.08 10.71 4.08 1.11 11.10 2.73 30.41 1.22
JSB JSB Financial, Inc. of NY* 23.21 23.21 1.92 8.59 5.13 1.71 7.64 NA NA 0.56
OCN Ocwen Financial Corp. of FL 13.67 13.17 2.83 26.10 5.33 0.81 7.43 NA NA NA
SIB Staten Island Bancorp of NY* 26.20 25.53 0.86 5.00 1.92 1.59 9.19 0.85 72.87 1.44
WES Westcorp Inc. of Orange CA 9.35 9.33 1.03 11.08 11.54 -0.21 -2.22 0.55 172.31 1.88
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 15.34 15.34 1.07 6.44 4.96 1.00 6.04 0.33 292.15 1.28
ANE Alliance Bncp of New Eng of CT* 7.97 7.78 0.89 12.20 5.44 0.52 7.15 1.51 82.82 1.96
BKC American Bank of Waterbury CT* 9.01 8.74 1.33 15.40 6.32 1.11 12.88 2.28 40.39 1.54
BFD BostonFed Bancorp of MA 7.87 7.59 0.72 8.51 5.56 0.61 7.20 0.15 467.89 0.84
CNY Carver Bancorp, Inc. of NY 8.48 8.16 -0.11 -1.33 -1.47 0.02 0.20 NA NA 1.04
CBK Citizens First Fin.Corp. of IL 13.84 13.84 0.72 5.13 3.90 0.45 3.22 0.71 47.08 0.41
EFC EFC Bancorp Inc of IL 23.77 23.77 1.07 4.51 4.00 1.07 4.51 0.46 57.60 0.45
EBI Equality Bancorp, Inc. of MO 11.18 11.18 0.53 7.30 3.39 0.12 1.59 0.39 31.69 0.25
ESX Essex Bancorp of Norfolk VA(8) 0.02 -0.08 -0.11 NM -5.15 -0.11 NM 1.69 71.25 1.33
FCB Falmouth Bancorp, Inc. of MA* 22.41 22.41 1.02 4.33 3.40 0.81 3.44 0.05 NA 0.74
FAB FirstFed America Bancorp of MA 11.17 11.17 0.17 1.58 0.98 0.53 4.99 0.31 275.70 1.16
GAF GA Financial Corp. of PA 14.01 13.88 1.09 7.23 5.40 1.03 6.84 0.21 81.02 0.42
HBS Haywood Bancshares, Inc. of NC* 14.85 14.38 1.46 10.18 7.69 1.46 10.18 0.37 131.68 0.65
KNK Kankakee Bancorp, Inc. of IL 9.64 8.02 0.86 7.99 6.33 0.83 7.77 1.12 55.72 0.98
KYF Kentucky First Bancorp of KY 17.04 17.04 1.13 6.76 5.02 1.11 6.68 0.18 263.19 0.76
MBB MSB Bancorp of Middletown NY(8)* 8.15 4.33 0.29 3.63 2.22 0.40 5.04 1.61 22.76 0.71
NBN Northeast Bancorp of ME* 7.54 6.81 0.66 9.10 4.47 0.58 8.02 NA NA 1.12
NEP Northeast PA Fin. Corp of PA 18.26 18.26 0.62 3.38 2.82 0.62 3.38 0.22 178.76 0.64
PDB Piedmont Bancorp, Inc. of NC 16.09 16.09 1.24 7.56 5.70 1.22 7.43 0.48 142.37 0.82
SSB Scotland Bancorp, Inc. of NC 24.70 24.70 1.47 5.01 5.79 1.47 5.01 NA NA 0.60
SZB SouthFirst Bancshares of AL 10.07 9.83 0.55 4.64 3.49 0.52 4.37 1.04 46.23 0.75
SRN Southern Banc Company of AL 17.08 16.93 0.48 2.77 2.54 0.48 2.77 NA NA 0.19
SSM Stone Street Bancorp of NC 27.99 27.99 1.37 4.54 3.91 1.37 4.54 0.28 191.69 0.62
TSH Teche Holding Company of LA 13.83 13.83 0.93 6.90 5.45 0.92 6.84 0.20 423.05 0.98
FTF Texarkana Fst. Fin. Corp of AR 15.22 15.22 1.76 11.39 5.83 1.73 11.20 0.23 267.38 0.76
THR Three Rivers Fin. Corp. of MI 13.46 13.42 0.88 6.42 5.00 0.84 6.10 1.00 48.12 0.74
WSB Washington SB, FSB of MD 8.67 8.67 0.77 9.15 6.45 0.55 6.56 NA NA 0.99
WFI Winton Financial Corp. of OH 7.17 7.03 1.05 14.60 4.92 0.86 12.04 NA NA NA
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 9.02 8.87 0.75 8.78 6.50 0.51 5.98 1.71 26.55 0.62
FBER 1st Bergen Bancorp of NJ 11.69 11.69 0.75 5.40 4.05 0.75 5.40 0.95 104.08 2.38
AFED AFSALA Bancorp, Inc. of NY(8) 12.52 12.52 0.78 5.89 4.40 0.78 5.89 0.37 185.39 1.46
ALBK ALBANK Fin. Corp. of Albany NY 8.97 7.02 1.16 12.76 6.58 1.14 12.61 0.92 78.98 1.05
AMFC AMB Financial Corp. of IN 14.11 14.11 1.02 6.89 5.71 0.58 3.93 0.33 122.66 0.52
ASBP ASB Financial Corp. of OH 15.20 15.20 0.96 6.17 4.53 0.94 6.08 0.14 513.38 1.03
ABBK Abington Bancorp of MA* 6.29 5.72 0.86 12.72 6.94 0.73 10.78 0.14 310.69 0.72
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AABC Access Anytime Bancorp of NM 8.09 8.09 1.45 18.31 10.67 1.35 17.02 0.14 335.63 0.77
AFBC Advance Fin. Bancorp of WV 14.09 14.09 0.90 5.94 4.91 0.85 5.61 0.60 51.29 0.35
AFCB Affiliated Comm BC, Inc of MA(8) 10.16 10.12 1.09 11.03 4.79 1.04 10.55 0.41 186.48 1.24
ALBC Albion Banc Corp. of Albion NY 8.54 8.54 0.48 5.58 4.29 0.46 5.33 0.55 67.74 0.50
ABCL Alliance Bancorp, Inc. of IL 8.59 8.49 0.89 9.72 5.68 0.91 9.97 0.22 156.51 0.56
ALLB Alliance Bank MHC of PA (19.9) 10.72 10.72 0.80 7.09 1.77 0.80 7.09 1.38 41.98 1.02
AHCI Ambanc Holding Co., Inc. of NY* 11.69 11.69 0.51 4.18 3.13 0.41 3.34 0.62 122.28 1.37
ASBI Ameriana Bancorp of IN 11.64 11.42 0.96 8.54 5.87 0.82 7.28 0.47 64.16 0.41
ABCW Anchor Bancorp Wisconsin of WI 6.40 6.30 1.06 16.56 5.40 0.94 14.75 0.68 160.68 1.34
ANDB Andover Bancorp, Inc. of MA* 7.93 7.93 1.06 13.22 6.19 1.03 12.84 0.49 184.92 1.24
ASFC Astoria Financial Corp. of NY 7.96 5.63 0.81 10.29 4.98 0.74 9.46 0.54 67.50 0.85
AVND Avondale Fin. Corp. of IL 7.60 7.60 -0.78 -9.53 -7.78 -0.56 -6.82 1.14 84.08 2.31
BKCT Bancorp Connecticut of CT* 10.04 10.04 1.42 13.66 5.99 1.22 11.76 0.74 151.22 2.06
BPLS Bank Plus Corp. of CA 4.40 4.02 0.31 6.79 4.79 0.36 7.89 1.64 69.52 1.66
BNKU Bank United Corp. of TX 4.98 4.50 0.87 17.22 6.58 0.82 16.38 0.65 52.00 0.44
BWFC Bank West Fin. Corp. of MI 13.01 13.01 0.66 4.68 2.88 0.53 3.76 0.44 35.64 0.23
BANC BankAtlantic Bancorp of FL 6.16 5.16 0.89 15.06 5.89 0.39 6.51 1.17 72.73 1.12
BKUNA BankUnited Fin. Corp. of FL 4.38 3.80 0.28 6.84 2.33 0.21 5.21 0.44 32.93 0.19
BVCC Bay View Capital Corp. of CA 7.28 4.66 0.38 6.07 2.12 0.60 9.46 0.37 244.94 1.22
FSNJ Bayonne Banchsares of NJ 15.76 15.76 0.46 3.99 1.85 0.65 5.73 1.01 48.09 1.27
BFSB Bedford Bancshares, Inc. of VA 13.29 13.29 1.20 8.51 4.94 1.19 8.45 0.43 112.25 0.60
BFFC Big Foot Fin. Corp. of IL 18.28 18.28 0.52 2.95 2.27 0.45 2.55 0.09 150.75 0.28
BYFC Broadway Fin. Corp. of CA 10.13 10.13 0.48 4.65 5.75 0.33 3.23 1.22 69.07 1.01
BRKL Brookline Bncp MHC of MA(47.0) 17.16 17.16 0.78 4.56 2.32 0.78 4.56 0.62 245.94 2.30
CBES CBES Bancorp, Inc. of MO 14.23 14.23 1.04 6.29 5.51 0.86 5.22 0.53 92.07 0.54
CCFH CCF Holding Company of GA 8.09 8.09 0.14 1.36 0.75 -0.13 -1.21 0.41 123.98 0.67
CFSB CFSB Bancorp of Lansing MI 7.72 7.72 1.32 17.09 4.97 1.20 15.58 0.08 724.89 0.65
CKFB CKF Bancorp of Danville KY 21.33 21.33 1.87 8.17 7.05 1.41 6.16 0.43 48.87 0.23
CNSB CNS Bancorp, Inc. of MO 24.68 24.68 0.91 3.68 3.06 0.84 3.41 0.10 422.34 0.59
CSBF CSB Financial Group Inc of IL 24.00 22.65 0.50 2.01 2.11 0.43 1.73 0.95 39.74 0.66
CBCI Calumet Bancorp of Chicago IL 17.49 17.49 2.08 12.69 9.03 2.08 12.72 1.45 82.15 1.53
CAFI Camco Fin. Corp. of OH 9.89 9.29 1.26 13.08 6.10 0.95 9.90 0.68 43.07 0.35
CMRN Cameron Fin. Corp. of MO 20.78 20.78 1.16 5.38 4.55 1.13 5.26 0.81 95.78 0.94
CAPS Capital Savings Bancorp of MO(8) 10.13 10.13 1.10 11.90 6.18 0.94 10.19 0.38 91.74 0.43
CFNC Carolina Fincorp of NC* 22.35 22.35 0.92 4.05 3.14 1.06 4.64 0.15 226.37 0.49
CASB Cascade Financial Corp. of WA 6.98 6.98 0.77 11.70 4.67 0.73 11.05 0.42 226.15 1.08
CATB Catskill Fin. Corp. of NY* 23.42 23.42 1.33 5.36 4.85 1.32 5.30 0.29 219.08 1.49
CAVB Cavalry Bancorp of TN 28.43 28.43 1.48 7.18 2.64 1.02 4.98 0.01 NA 1.23
CNIT Cenit Bancorp of Norfolk VA 6.88 6.34 0.90 12.81 5.27 0.84 11.92 0.36 145.18 0.72
CEBK Central Co-Op. Bank of MA* 9.82 8.88 0.81 8.09 4.99 0.74 7.40 0.42 185.68 1.08
CENB Century Bancorp, Inc. of NC(8) 17.75 17.75 1.33 4.81 5.37 1.33 4.81 0.37 144.73 0.82
COFI Charter One Financial of OH 7.37 6.91 0.87 12.46 3.30 1.21 17.31 0.38 151.36 0.87
CVAL Chester Valley Bancorp of PA 8.67 8.67 1.02 11.89 4.72 0.93 10.80 0.24 390.28 1.21
CTZN CitFed Bancorp of Dayton OH(8) 6.26 5.76 0.89 14.17 4.47 0.90 14.36 0.32 137.85 0.78
CLAS Classic Bancshares, Inc. of KY 15.06 12.84 0.83 5.60 5.21 0.97 6.53 0.42 148.74 0.92
CBSA Coastal Bancorp of Houston TX 3.73 3.21 0.49 13.88 7.35 0.50 14.27 0.57 50.93 0.64
CFCP Coastal Fin. Corp. of SC 6.03 6.03 1.22 19.83 5.48 1.01 16.35 0.91 98.94 1.22
CMSB Commonwealth Bancorp Inc of PA 9.12 7.29 0.68 7.23 4.06 0.51 5.43 0.42 90.64 0.64
CMSV Commty. Svgs, MHC of FL (48.5) 10.80 10.80 0.74 6.58 2.91 0.68 6.07 0.26 134.87 0.55
CFTP Community Fed. Bancorp of MS 23.61 23.61 1.20 4.37 3.28 1.14 4.15 0.49 48.59 0.44
CFFC Community Fin. Corp. of VA 13.63 13.58 1.06 7.80 4.91 1.08 7.91 0.44 129.75 0.65
CIBI Community Inv. Bancorp of OH 10.99 10.99 0.94 8.15 4.77 0.94 8.15 0.56 89.73 0.61
COOP Cooperative Bancshares of NC 7.64 7.64 0.63 8.22 4.16 0.57 7.46 0.16 167.34 0.35
CRZY Crazy Woman Creek Bncorp of WY 23.58 23.58 1.27 5.13 4.25 1.29 5.20 0.09 511.11 0.94
DNFC D&N Financial Corp. of MI 5.44 5.40 0.87 15.78 6.30 0.77 14.04 0.56 101.76 0.77
DCBI Delphos Citizens Bancorp of OH 24.95 24.95 1.60 5.91 4.39 1.60 5.91 0.56 17.75 0.12
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DIME Dime Community Bancorp of NY* 12.01 10.44 0.83 6.19 3.24 0.79 5.86 0.48 159.03 1.36
DIBK Dime Financial Corp. of CT(8)* 8.11 7.92 1.70 21.06 8.34 1.69 20.92 0.29 396.36 3.17
ESBF ESB Financial Corp of PA 7.20 6.42 0.70 9.13 5.44 0.69 9.04 0.44 116.49 1.37
EGLB Eagle BancGroup of IL 11.47 11.47 0.34 2.87 2.58 0.17 1.43 1.27 41.32 0.77
EBSI Eagle Bancshares of Tucker GA 7.83 7.83 0.66 8.05 4.17 0.67 8.14 1.18 56.90 0.92
ETFS East Texas Fin. Serv. of TX 17.43 17.43 0.60 3.31 2.83 0.54 3.01 0.41 47.58 0.38
ESBK Elmira Svgs Bank (The) of NY* 6.21 6.21 0.44 7.05 4.62 0.47 7.47 0.68 97.63 0.85
EMLD Emerald Financial Corp. of OH 8.27 8.15 1.09 13.88 4.83 1.00 12.80 0.38 73.95 0.37
EFBC Empire Federal Bancorp of MT 36.97 36.97 1.45 4.91 3.61 1.45 4.91 0.01 NA 0.43
EFBI Enterprise Fed. Bancorp of OH 10.75 10.74 0.81 6.91 3.37 0.74 6.28 0.01 NA 0.29
EQSB Equitable FSB of Wheaton MD 5.18 5.18 0.72 14.03 6.00 0.70 13.57 0.39 NA NA
FCBF FCB Fin. Corp. of Neenah WI 14.09 14.09 1.15 7.62 3.82 0.84 5.61 0.26 269.82 0.89
FFDF FFD Financial Corp. of OH 22.27 22.27 1.73 7.25 4.64 0.78 3.26 0.08 329.27 0.40
FFLC FFLC Bancorp of Leesburg FL 12.71 12.71 0.98 7.28 5.04 0.92 6.84 0.31 147.07 0.56
FFWC FFW Corporation of Wabash IN 9.58 8.79 1.01 10.48 7.36 0.98 10.15 0.33 113.70 0.57
FFYF FFY Financial Corp. of OH 13.10 13.10 1.28 9.36 5.94 1.26 9.21 0.53 81.15 0.60
FMCO FMS Financial Corp. of NJ 5.95 5.89 0.90 14.36 4.75 0.90 14.29 0.70 68.15 1.05
FFHH FSF Financial Corp. of MN 10.40 10.40 0.83 7.50 5.71 0.80 7.23 0.18 131.50 0.34
FOBC Fed One Bancorp of Wheeling WV(8) 11.24 10.79 0.86 7.66 3.42 0.85 7.60 0.29 141.57 0.90
FBCI Fidelity Bancorp of Chicago IL 10.78 10.77 0.21 2.04 1.56 0.62 5.95 0.29 33.82 0.12
FSBI Fidelity Bancorp, Inc. of PA 6.84 6.84 0.75 10.93 5.71 0.74 10.78 0.08 658.57 1.05
FFFL Fidelity Bcsh MHC of FL (47.7) 6.70 6.50 0.66 8.52 3.56 0.57 7.32 0.32 75.42 0.36
FFED Fidelity Fed. Bancorp of IN 6.78 6.78 -0.34 -5.64 -3.28 -0.26 -4.29 0.38 613.16 2.77
FFOH Fidelity Financial of OH 12.05 10.67 0.92 7.30 5.01 0.89 7.05 0.18 174.24 0.39
FIBC Financial Bancorp, Inc. of NY 9.04 9.00 0.94 10.24 5.92 0.92 9.99 2.19 23.74 0.93
FBSI First Bancshares, Inc. of MO 13.42 12.86 1.11 7.98 6.20 1.06 7.60 0.87 33.59 0.36
FBBC First Bell Bancorp of PA 11.22 11.22 1.09 10.37 5.68 1.06 10.10 0.07 156.05 0.13
SKBO First Carnegie MHC of PA(45.0) 17.20 17.20 0.64 4.58 2.06 0.71 5.13 0.78 47.72 0.85
FSTC First Citizens Corp of GA 10.12 7.98 1.96 20.63 6.74 1.75 18.43 1.12 99.21 1.46
FCBK First Coastal Bankshares of VA(8) 7.14 7.14 0.69 9.82 4.74 0.53 7.51 1.34 51.28 0.93
FCME First Coastal Corp. of ME* 10.06 10.06 0.85 8.88 6.93 0.74 7.75 0.50 358.51 2.48
FFBA First Colorado Bancorp of CO(8) 13.46 13.19 1.31 9.83 4.14 1.24 9.33 0.18 176.16 0.41
FDEF First Defiance Fin.Corp. of OH 17.64 17.64 0.95 4.82 4.26 0.90 4.60 0.31 158.28 0.62
FESX First Essex Bancorp of MA* 7.04 6.21 0.84 11.58 5.98 0.77 10.56 0.54 150.53 1.49
FFSX First FSB MHC Sxld of IA(46.1) 7.21 5.70 0.68 8.30 3.11 0.69 8.38 0.36 122.22 0.61
FFES First Fed of E. Hartford CT 6.92 6.92 0.58 8.72 5.65 0.64 9.68 0.31 85.02 1.32
BDJI First Fed. Bancorp. of MN 10.89 10.89 0.68 6.36 4.11 0.68 6.36 0.24 161.48 0.81
FFBH First Fed. Bancshares of AR 14.76 14.76 1.00 6.61 4.00 0.94 6.25 0.85 21.71 0.24
FTFC First Fed. Capital Corp. of WI 7.17 6.80 1.18 17.50 5.73 0.90 13.28 0.21 229.95 0.61
FFKY First Fed. Fin. Corp. of KY 13.21 12.51 1.63 12.01 5.53 1.59 11.69 0.47 94.14 0.52
FFBZ First Federal Bancorp of OH 7.62 7.61 0.90 11.79 4.50 0.89 11.69 0.46 219.63 1.18
FFCH First Fin. Holdings Inc. of SC 6.36 6.36 0.88 14.12 4.84 0.85 13.62 1.26 51.68 0.80
FFHS First Franklin Corp. of OH 9.24 9.20 0.82 9.03 6.09 0.71 7.82 0.49 92.09 0.68
FGHC First Georgia Hold. Corp of GA 8.09 7.55 1.13 13.67 3.93 1.13 13.67 1.64 38.60 0.72
FSPG First Home Bancorp of NJ(8) 7.00 6.91 0.88 12.87 5.49 0.86 12.64 0.80 82.62 1.30
FFSL First Independence Corp. of KS 9.28 9.28 0.66 6.57 5.59 0.66 6.57 0.51 102.98 0.76
FISB First Indiana Corp. of IN 9.26 9.16 1.15 12.13 5.86 0.87 9.14 1.38 103.15 1.70
FKFS First Keystone Fin. Corp of PA 6.67 6.67 0.77 11.25 5.95 0.68 9.96 1.34 34.27 0.89
FLKY First Lancaster Bncshrs of KY 26.64 26.64 1.03 3.44 3.28 1.03 3.44 1.70 18.91 0.36
FLFC First Liberty Fin. Corp. of GA 7.59 6.90 0.76 10.21 3.49 0.78 10.59 0.82 114.75 1.38
CASH First Midwest Fin., Inc. of OH 10.39 9.24 0.59 5.41 3.63 0.52 4.73 1.11 78.58 1.40
FMBD First Mutual Bancorp Inc of IL 14.15 10.96 0.32 2.39 2.14 0.25 1.87 0.43 85.81 0.47
FMSB First Mutual SB of Bellevue WA* 6.79 6.79 1.03 15.35 6.13 1.01 15.06 0.15 714.97 1.23
FNGB First Northern Cap. Corp of WI 11.10 11.10 0.96 8.56 5.19 0.90 8.07 0.12 405.46 0.54
FFPB First Palm Beach Bancorp of FL 6.37 6.23 0.56 8.55 4.25 0.43 6.57 0.57 62.53 0.61
FWWB First Savings Bancorp of WA 13.38 12.39 1.21 8.51 4.87 1.14 8.04 0.25 263.53 0.97
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FSFF First SecurityFed Fin of IL 29.09 28.99 0.66 4.22 1.67 1.29 8.28 0.37 158.47 0.96
SHEN First Shenango Bancorp of PA(8) 11.98 11.98 1.09 9.41 4.83 1.11 9.59 0.97 83.39 1.27
FSLA First Source Bancorp of NJ 20.55 20.55 1.09 5.31 4.05 1.09 5.31 0.47 115.69 1.04
SOPN First Svgs Bancorp of NC 23.03 23.03 1.78 7.65 6.02 1.78 7.65 0.16 125.31 0.30
FBNW FirstBank Corp of Clarkston WA 16.36 16.36 1.03 7.72 4.07 0.62 4.67 0.73 83.64 0.76
FFDB FirstFed Bancorp, Inc. of AL 9.69 8.90 0.96 9.89 6.04 0.96 9.89 1.42 45.57 0.95
FSPT FirstSpartan Fin. Corp. of SC 26.29 26.29 1.33 6.94 3.32 1.32 6.89 0.35 115.67 0.49
FLAG Flag Financial Corp of GA 8.90 8.90 0.89 9.60 2.91 0.61 6.59 0.99 91.47 1.30
FLGS Flagstar Bancorp, Inc of MI 5.21 5.04 1.30 21.55 7.66 1.30 21.55 2.32 11.78 0.31
FFIC Flushing Fin. Corp. of NY* 12.72 12.23 0.92 6.57 4.17 0.93 6.63 0.31 199.94 1.04
FBHC Fort Bend Holding Corp. of TX(8) 6.77 6.35 0.78 12.28 6.13 0.57 9.06 0.47 114.18 1.02
FTSB Fort Thomas Fin. Corp. of KY 15.77 15.77 1.23 7.71 5.38 1.23 7.71 2.22 19.86 0.49
FKKY Frankfort First Bancorp of KY 16.95 16.95 0.25 1.31 1.21 0.80 4.26 0.12 63.29 0.08
FTNB Fulton Bancorp, Inc. of MO 23.37 23.37 1.22 5.01 3.77 0.95 3.88 0.70 126.01 1.06
GUPB GFSB Bancorp, Inc of Gallup NM 12.34 12.34 0.91 6.67 5.10 0.91 6.67 0.37 86.67 0.54
GSLA GS Financial Corp. of LA 41.63 41.63 1.44 3.79 3.11 1.29 3.39 0.13 264.81 0.77
GOSB GSB Financial Corp. of NY* 28.14 28.14 0.73 3.54 2.20 0.69 3.36 0.10 147.83 0.24
GBNK Gaston Fed Bncp MHC of NC(47.0) 22.48 22.48 1.13 5.02 2.57 1.13 5.02 0.32 134.01 0.92
GFCO Glenway Financial Corp. of OH 9.57 9.49 0.86 9.12 4.99 0.86 9.04 0.19 184.71 0.41
GTPS Great American Bancorp of IL 18.33 18.33 0.66 3.24 2.70 0.66 3.24 0.11 346.45 0.48
PEDE Great Pee Dee Bancorp of SC 37.86 37.86 1.57 4.15 3.61 1.57 4.15 0.73 65.48 0.59
GSBC Great Southern Bancorp of MO 8.20 8.14 1.89 21.95 6.68 1.69 19.67 1.51 129.74 2.39
GSFC Green Street Fin. Corp. of NC 35.78 35.78 1.60 4.49 4.03 1.60 4.49 0.18 78.95 0.19
GFED Guaranty Fed Bancshares of MO 28.34 28.34 1.12 5.49 2.94 1.09 5.34 0.59 152.53 1.14
HCBB HCB Bancshares of Camden AR 18.65 17.99 0.30 2.05 1.41 0.30 2.05 0.23 316.88 1.42
HEMT HF Bancorp of Hemet CA 7.86 6.67 -0.04 -0.54 -0.39 0.13 1.61 0.95 59.24 1.00
HFFC HF Financial Corp. of SD 9.72 9.72 1.09 11.47 5.86 1.01 10.71 0.49 196.91 1.26
HFNC HFNC Financial Corp. of NC(8) 17.24 17.24 1.34 7.36 5.54 0.92 5.05 0.73 98.43 0.89
HMNF HMN Financial, Inc. of MN 11.60 10.79 0.93 6.97 5.06 0.66 4.95 0.12 327.35 0.61
HALL Hallmark Capital Corp. of WI 7.68 7.68 0.67 9.13 6.38 0.64 8.65 0.27 197.24 0.78
HRBF Harbor Federal Bancorp of MD 12.69 12.69 0.75 5.86 4.21 0.72 5.62 0.42 50.26 0.33
HARB Harbor Florida Bancshrs of FL 19.81 19.60 1.25 11.33 3.80 1.20 10.84 0.47 198.97 1.33
HFSA Hardin Bancorp of Hardin MO 11.13 11.13 0.77 6.54 5.47 0.66 5.61 0.19 110.22 0.40
HARL Harleysville SB of PA 6.67 6.67 1.01 15.23 6.35 1.01 15.23 NA NA 0.79
HFGI Harrington Fin. Group of IN 4.42 4.42 -0.02 -0.40 -0.26 0.04 0.94 0.16 23.48 0.16
HARS Harris Fin. MHC of PA (24.3) 8.12 7.30 0.88 10.93 2.16 0.72 8.95 0.66 60.87 0.99
HFFB Harrodsburg 1st Fin Bcrp of KY 26.46 26.46 1.36 5.08 4.50 1.36 5.08 0.44 79.96 0.45
HHFC Harvest Home Fin. Corp. of OH 11.12 11.12 0.77 6.53 5.07 0.67 5.67 0.23 56.81 0.27
HAVN Haven Bancorp of Woodhaven NY 5.65 5.64 0.53 9.11 4.23 0.53 9.03 0.57 112.56 1.08
HTHR Hawthorne Fin. Corp. of CA 4.25 4.25 0.97 21.97 14.69 1.14 25.72 6.04 22.28 1.46
HMLK Hemlock Fed. Fin. Corp. of IL 16.20 16.20 0.99 5.53 4.50 0.99 5.53 0.23 175.34 0.94
HBSC Heritage Bancorp, Inc of SC 28.79 28.79 1.16 4.02 3.71 1.16 4.02 NA NA 0.38
HFWA Heritage Financial Corp of WA 28.80 28.80 1.11 5.92 2.43 0.57 3.04 0.12 761.93 1.28
HCBC High Country Bancorp of CO 19.56 19.56 0.84 5.87 3.48 0.84 5.87 0.45 167.06 0.94
HBNK Highland Bancorp of CA 7.84 7.84 1.30 17.06 6.89 1.13 14.83 1.95 84.08 2.06
HIFS Hingham Inst. for Sav. of MA* 9.48 9.48 1.25 13.13 5.71 1.25 13.13 0.42 166.84 0.89
HBEI Home Bancorp of Elgin IL(8) 25.92 25.92 0.70 2.57 2.07 0.70 2.57 0.32 93.09 0.36
HBFW Home Bancorp of Fort Wayne IN 12.03 12.03 0.86 6.72 3.85 0.84 6.56 0.08 463.00 0.45
HCFC Home City Fin. Corp. of OH 18.58 18.58 1.29 6.57 6.13 1.29 6.57 0.65 90.76 0.66
HOMF Home Fed Bancorp of Seymour IN 9.20 8.95 1.45 16.58 6.02 1.17 13.44 0.53 107.55 0.68
HWEN Home Financial Bancorp of IN 17.99 17.99 0.94 5.32 4.80 0.74 4.18 1.32 53.55 0.86
HLFC Home Loan Financial Corp of OH 38.94 38.94 1.30 5.70 2.35 1.30 5.70 0.44 56.90 0.36
HPBC Home Port Bancorp, Inc. of MA* 9.78 9.78 1.47 14.04 6.52 1.63 15.59 0.29 430.57 1.49
HFBC HopFed Bancorp of KY 25.98 25.98 1.12 10.32 3.17 1.12 10.32 0.15 70.97 0.23
HZFS Horizon Fin'l. Services of IA 9.11 9.11 0.91 9.24 5.58 0.70 7.08 0.92 45.20 0.69
HRZB Horizon Financial Corp. of WA* 15.33 15.33 1.55 10.00 6.20 1.54 9.91 0.01 NA 0.83
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
IBSF IBS Financial Corp. of NJ(8) 17.36 17.36 0.82 4.70 2.93 0.82 4.70 0.09 156.87 0.47
ITLA ITLA Capital Corp of CA* 10.18 10.14 1.43 13.51 7.51 1.43 13.51 1.31 102.95 1.63
ICBC Independence Comm Bnk Cp of NY 21.70 20.32 0.64 2.95 2.13 0.85 3.90 0.70 126.32 1.24
IFSB Independence FSB of DC 7.25 6.45 0.54 8.04 6.41 0.22 3.32 1.41 16.50 0.40
INBI Industrial Bancorp of OH 16.48 16.48 1.48 8.53 4.92 1.48 8.53 0.25 188.24 0.54
IWBK Interwest Bancorp of WA 6.76 6.66 1.04 15.60 5.26 0.88 13.20 0.66 66.76 0.76
IPSW Ipswich SB of Ipswich MA* 5.28 5.28 1.24 22.32 5.89 0.94 16.84 0.79 90.70 0.89
JXVL Jacksonville Bancorp of TX 14.73 14.73 1.45 9.79 6.56 1.45 9.79 0.75 65.39 0.64
JXSB Jcksnville SB,MHC of IL (45.6) 10.38 10.38 0.59 5.64 2.27 0.38 3.65 0.86 54.02 0.61
JSBA Jefferson Svgs Bancorp of MO 9.39 7.46 0.82 9.53 3.21 0.76 8.88 0.66 96.80 0.88
JOAC Joachim Bancorp, Inc. of MO(8) 28.92 28.92 0.76 2.64 2.26 0.76 2.64 0.25 89.29 0.30
KSBK KSB Bancorp of Kingfield ME* 7.36 7.00 1.07 14.93 6.44 1.07 14.93 NA NA 1.10
KFBI Klamath First Bancorp of OR 15.01 13.78 0.97 5.86 4.29 0.97 5.86 0.02 765.13 0.25
LSBI LSB Fin. Corp. of Lafayette IN 8.42 8.42 0.82 9.48 5.70 0.74 8.49 1.69 41.16 0.81
LVSB Lakeview Financial of NJ 9.65 7.92 1.44 13.78 7.74 0.90 8.63 1.27 57.56 1.42
LARK Landmark Bancshares, Inc of KS 14.12 14.12 1.08 7.66 5.52 0.95 6.73 0.21 217.31 0.63
LARL Laurel Capital Group of PA 10.63 10.63 1.43 13.75 6.78 1.40 13.45 0.37 226.91 1.24
LSBX Lawrence Savings Bank of MA* 11.13 11.13 2.47 25.38 12.59 2.43 25.00 0.40 218.48 1.79
LFED Leeds Fed Bksr MHC of MD (36.3) 16.50 16.50 1.18 7.20 3.26 1.18 7.20 NA NA 0.29
LXMO Lexington B&L Fin. Corp. of MO 18.02 16.90 0.95 4.19 3.94 0.95 4.19 0.47 135.29 0.95
LFCO Life Financial Corp of CA(8) 15.12 15.12 4.91 32.88 11.13 5.09 34.09 2.43 43.86 1.76
LFBI Little Falls Bancorp of NJ 10.20 9.42 0.58 4.85 3.64 0.55 4.66 0.43 78.51 0.81
LOGN Logansport Fin. Corp. of IN 18.86 18.86 1.49 7.78 5.41 1.52 7.93 0.57 46.97 0.37
LISB Long Island Bancorp, Inc of NY(8) 8.95 8.88 0.87 9.63 3.54 0.71 7.78 0.86 62.70 0.91
MAFB MAF Bancorp, Inc. of IL 7.74 6.87 1.12 14.44 6.68 1.09 14.04 0.55 80.77 0.56
MBLF MBLA Financial Corp. of MO 12.68 12.68 0.81 6.30 5.93 0.83 6.43 0.55 59.37 0.50
MECH MECH Financial Inc of CT* 9.59 9.59 1.54 15.45 8.33 1.54 15.45 0.56 258.21 2.28
MFBC MFB Corp. of Mishawaka IN 11.77 11.77 0.84 6.40 4.85 0.82 6.30 0.02 645.16 0.18
MSBF MSB Financial, Inc of MI 16.70 16.70 1.55 9.28 5.97 1.38 8.23 0.74 60.27 0.49
MARN Marion Capital Holdings of IN 20.55 20.11 1.33 6.13 4.85 1.33 6.13 1.00 106.41 1.26
MRKF Market Fin. Corp. of OH 35.28 35.28 1.13 3.21 3.43 1.13 3.21 0.33 27.08 0.17
MFSL Maryland Fed. Bancorp of MD(8) 8.76 8.68 0.62 7.09 2.92 0.87 9.96 0.66 60.90 0.48
MASB MassBank Corp. of Reading MA* 11.52 11.36 1.15 10.59 5.94 1.03 9.55 0.17 152.27 0.86
MFLR Mayflower Co-Op. Bank of MA* 9.75 9.61 1.11 11.52 6.24 1.05 10.93 0.69 124.95 1.49
MDBK Medford Bancorp, Inc. of MA* 9.24 8.73 1.08 11.95 6.12 1.01 11.26 0.13 481.96 1.17
MWBX MetroWest Bank of MA* 7.21 7.21 1.30 17.59 7.02 1.27 17.26 0.70 208.27 2.01
METF Metropolitan Fin. Corp. of OH 3.86 3.57 0.74 18.94 5.95 0.66 16.70 0.92 64.73 0.78
MIFC Mid Iowa Financial Corp. of IA 8.85 8.84 1.16 12.64 7.57 1.25 13.64 0.07 275.00 0.41
MCBN Mid-Coast Bancorp of ME 8.47 8.47 0.78 9.15 5.83 0.72 8.47 0.58 95.07 0.68
MWBI Midwest Bancshares, Inc. of IA 6.89 6.89 0.89 12.81 8.12 0.78 11.22 0.66 43.60 0.50
MFFC Milton Fed. Fin. Corp. of OH 11.35 11.35 0.68 5.39 3.94 0.61 4.79 0.28 85.06 0.36
MBSP Mitchell Bancorp, Inc. of NC 39.32 39.32 1.44 3.47 3.22 1.44 3.47 1.56 33.74 0.68
MBBC Monterey Bay Bancorp of CA 11.68 10.92 0.42 3.72 2.53 0.39 3.45 0.35 131.09 0.67
MONT Montgomery Fin. Corp. of IN 18.25 18.25 0.80 4.71 3.88 0.80 4.71 NA NA 0.19
MSBK Mutual SB, FSB of Bay City MI 5.07 5.07 -1.31 -22.89 -16.24 -0.46 -8.09 0.07 427.08 0.63
MYST Mystic Financial of MA* 19.06 19.06 0.73 5.82 3.41 0.67 5.38 0.25 254.55 0.91
NHTB NH Thrift Bancshares of NH 8.09 7.03 0.90 11.47 6.93 0.83 10.62 0.76 126.05 1.20
NSLB NS&L Bancorp, Inc of Neosho MO 18.78 18.65 0.68 3.49 3.37 0.68 3.49 0.11 73.53 0.14
NSSY NSS Bancorp of CT* 8.12 7.90 1.00 12.37 6.66 1.14 13.99 NA NA 1.31
NMSB Newmil Bancorp, Inc. of CT* 8.91 8.91 0.84 8.78 5.48 0.83 8.66 0.63 215.34 2.87
NBCP Niagara Bancorp of NY MHC(45.4)* 12.03 12.03 0.55 4.56 3.65 0.55 4.56 0.25 217.16 1.10
NBSI North Bancshares of Chicago IL 11.45 11.45 0.47 3.48 2.60 0.44 3.24 NA NA 0.27
FFFD North Central Bancshares of IA 15.43 13.42 1.14 7.38 5.40 1.14 7.38 0.16 472.78 1.02
NEIB Northeast Indiana Bncrp of IN 13.34 13.34 1.20 8.36 6.05 1.20 8.36 0.18 352.92 0.72
NWSB Northwest Bcrp MHC of PA (30.7) 8.85 7.91 0.95 10.14 2.71 0.95 10.14 0.69 89.55 0.83
NWEQ Northwest Equity Corp. of WI 11.60 11.60 1.06 9.03 5.90 1.01 8.66 1.35 35.37 0.58
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NTMG Nutmeg FS&LA of CT 5.83 5.83 0.51 8.66 5.24 0.35 6.08 NA NA 0.55
OHSL OHSL Financial Corp. of OH 10.55 10.55 0.86 7.92 4.90 0.80 7.34 0.17 126.00 0.32
OCFC Ocean Fin. Corp. of NJ 14.22 14.22 0.95 6.13 4.68 0.95 6.13 0.48 92.94 0.82
OTFC Oregon Trail Fin. Corp. of OR 25.86 25.86 1.12 9.47 4.09 1.14 9.61 0.18 180.70 0.55
OFCP Ottawa Financial Corp. of MI 8.45 6.92 0.87 10.06 4.94 0.81 9.29 0.36 104.99 0.44
PFFB PFF Bancorp of Pomona CA 9.04 8.95 0.60 6.06 4.81 0.56 5.68 1.33 69.73 1.40
PSFI PS Financial of Chicago IL 27.81 27.81 1.10 3.19 3.20 1.85 5.37 2.36 8.79 0.42
PVFC PVF Capital Corp. of OH 7.20 7.20 1.34 18.73 7.32 1.26 17.66 0.69 95.38 0.74
PBCI Pamrapo Bancorp, Inc. of NJ 12.82 12.75 1.32 10.26 6.07 1.27 9.91 1.94 32.66 1.11
PFED Park Bancorp of Chicago IL 19.91 19.91 0.89 4.10 3.79 0.96 4.39 0.10 253.81 0.69
PVSA Parkvale Financial Corp of PA 7.82 7.78 1.08 13.98 6.65 1.08 13.98 0.52 262.03 1.79
PBHC Pathfinder BC MHC of NY (46.1)* 11.76 9.97 0.91 7.74 2.74 0.73 6.24 1.33 34.08 0.70
PEEK Peekskill Fin. Corp. of NY 22.99 22.99 1.03 4.09 3.60 1.06 4.22 0.89 38.25 1.39
PFSB PennFed Fin. Services of NJ 7.20 6.24 0.81 11.10 6.57 0.78 10.81 0.50 36.37 0.26
PWBK Pennwood Bancorp, Inc. of PA 18.34 18.34 0.77 4.19 3.39 0.92 5.03 1.60 44.68 1.09
PBKB People's Bancshares of MA* 3.67 3.54 0.76 16.93 6.03 0.33 7.45 0.42 119.36 0.86
TSBS Peoples Bancorp Inc of NJ* 12.60 11.41 1.06 6.69 1.99 0.79 5.02 0.64 63.09 0.86
PFDC Peoples Bancorp of Auburn IN 15.09 15.09 1.50 9.85 5.86 1.50 9.85 0.21 144.43 0.36
PBCT Peoples Bank, MHC of CT (40.1)* 9.23 7.91 1.18 13.44 3.91 0.63 7.21 0.66 166.94 1.76
PFFC Peoples Fin. Corp. of OH 19.15 19.15 1.29 6.79 4.88 0.50 2.63 0.01 NA 0.30
PHBK Peoples Heritage Fin Grp of ME* 6.72 5.11 1.22 16.61 6.09 1.21 16.48 0.91 99.98 1.26
PSFC Peoples Sidney Fin. Corp of OH 25.15 25.15 1.24 5.56 3.46 1.24 5.56 1.10 35.55 0.44
PERM Permanent Bancorp, Inc. of IN 10.00 9.88 0.62 6.56 3.82 0.61 6.46 0.70 70.95 0.97
PMFI Perpetual Midwest Fin. of IA(8) 8.99 8.99 0.53 6.14 4.00 0.48 5.58 0.30 255.13 0.86
PCBC Perry Co. Fin. Corp. of MO 18.94 18.94 1.03 5.46 4.33 1.02 5.41 NA NA 0.16
PHFC Pittsburgh Home Fin Corp of PA 7.43 7.34 0.79 8.24 6.31 0.67 6.99 1.37 34.44 0.79
PFSL Pocahontas Bancorp of AR 14.51 14.51 0.62 7.74 3.62 0.61 7.53 0.25 168.15 0.96
PTRS Potters Financial Corp of OH 8.71 8.71 0.80 9.05 5.39 0.78 8.78 0.13 NA 2.65
PHSB Ppls Home SB, MHC of PA (45.0) 12.76 12.76 0.81 7.30 3.11 0.72 6.49 0.36 164.84 1.32
PRBC Prestige Bancorp of PA 9.83 9.83 0.52 4.79 3.29 0.51 4.66 0.40 65.18 0.40
PFNC Progress Financial Corp. of PA 5.52 4.90 0.84 15.84 4.56 0.75 14.23 1.31 65.06 1.19
PSBK Progressive Bank, Inc. of NY(8)* 8.90 8.12 0.97 11.15 5.40 0.97 11.20 0.76 142.41 1.70
PROV Provident Fin. Holdings of CA 11.09 11.09 0.74 5.81 4.66 0.36 2.85 1.34 61.50 0.96
PULB Pulaski Bk,SB MHC of MO (29.8)(8) 13.41 13.41 1.07 8.15 2.00 0.92 6.99 NA NA 0.45
PLSK Pulaski SB, MHC of NJ (46.0) 11.54 11.54 0.63 5.86 2.97 0.63 5.86 0.73 67.79 0.93
PULS Pulse Bancorp of S. River NJ 8.34 8.34 1.07 13.13 6.55 1.08 13.27 0.60 61.50 1.41
QCFB QCF Bancorp of Virginia MN 17.57 17.57 1.63 9.26 6.02 1.63 9.26 1.22 67.47 1.92
QCBC Quaker City Bancorp of CA 8.76 8.76 0.76 8.74 6.10 0.74 8.48 1.25 74.34 1.17
QCSB Queens County Bancorp of NY* 10.45 10.45 1.47 12.54 3.41 1.45 12.37 0.55 106.38 0.67
RARB Raritan Bancorp of Raritan NJ* 7.54 7.44 0.99 13.02 5.69 0.97 12.79 0.34 234.10 1.20
REDF RedFed Bancorp of Redlands CA(8) 8.58 8.55 1.17 13.96 7.58 1.21 14.42 1.81 40.07 0.81
RELY Reliance Bancorp, Inc. of NY 8.89 6.14 0.90 10.66 5.05 0.95 11.27 NA NA 0.90
RELI Reliance Bancshares Inc of WI 49.97 49.97 1.03 2.11 2.46 1.03 2.11 NA NA 0.60
RCBK Richmond County Fin Corp of NY 22.04 21.95 0.19 1.11 0.47 1.53 9.09 0.47 96.51 1.17
RIVR River Valley Bancorp of IN 13.13 12.95 0.94 7.53 5.98 0.78 6.30 NA NA 1.00
RVSB Riverview Bancorp of WA 22.37 21.63 1.55 8.56 3.82 1.47 8.16 0.19 186.36 0.60
RSLN Roslyn Bancorp, Inc. of NY* 16.76 16.68 1.31 7.08 4.38 1.26 6.81 0.25 264.59 2.23
SCCB S. Carolina Comm. Bnshrs of SC 20.38 20.38 1.01 4.23 3.72 1.01 4.23 1.26 50.34 0.82
SBFL SB Fngr Lakes MHC of NY (33.1) 8.68 8.68 0.40 4.39 1.30 0.34 3.72 0.27 170.49 0.94
SFED SFS Bancorp of Schenectady NY 12.36 12.36 0.64 5.13 4.18 0.62 4.96 0.72 66.56 0.61
SGVB SGV Bancorp of W. Covina CA 7.89 7.78 0.38 5.10 3.72 0.43 5.79 1.45 24.47 0.46
SISB SIS Bancorp, Inc. of MA* 7.15 7.15 0.69 9.56 3.70 0.89 12.33 0.43 300.83 2.70
SWCB Sandwich Bancorp of MA(8)* 8.08 7.83 0.99 12.24 4.05 0.95 11.77 0.34 228.40 1.12
SFSL Security First Corp. of OH(8) 9.43 9.30 1.39 14.89 5.10 1.39 14.89 0.42 178.44 0.82
SKAN Skaneateles Bancorp Inc of NY* 6.98 6.80 0.64 9.32 6.49 0.63 9.07 2.01 49.89 1.21
SOBI Sobieski Bancorp of S. Bend IN 14.10 14.10 0.58 3.93 3.32 0.58 3.93 0.29 77.82 0.28
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
-------------------------------------------------------- ----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- -------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------ ------ ------ ------ ------ ------ ------ ------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SOSA Somerset Savings Bank of MA(8)* 7.25 7.25 1.46 22.33 8.97 1.40 21.36 4.58 32.38 1.90
SSFC South Street Fin. Corp. of NC* 15.88 15.88 0.64 2.97 3.28 0.66 3.06 0.22 88.30 0.39
SBAN SouthBanc Shares Inc. of SC(8) 21.85 21.85 0.94 4.29 3.67 0.94 4.29 NA NA 1.02
SCBS Southern Commun. Bncshrs of AL 20.42 20.42 1.15 5.98 4.18 1.15 5.98 0.36 308.46 1.70
SMBC Southern Missouri Bncrp of MO 16.77 16.77 0.70 4.27 3.25 0.66 4.02 0.63 89.98 0.76
SWBI Southwest Bancshares of IL(8) 11.62 11.62 1.14 10.03 4.85 1.12 9.84 0.16 122.22 0.28
SVRN Sovereign Bancorp, Inc. of PA 4.92 4.22 0.45 9.96 2.60 0.68 15.15 0.63 98.91 1.05
STFR St. Francis Cap. Corp. of WI 8.00 7.15 0.80 9.96 6.01 0.77 9.60 0.21 215.62 0.95
SPBC St. Paul Bancorp, Inc. of IL 9.34 9.31 1.08 12.09 5.70 1.06 11.84 0.20 367.36 1.02
SFFC StateFed Financial Corp. of IA 17.73 17.73 1.25 7.09 4.87 1.25 7.09 1.70 15.32 0.33
SFIN Statewide Fin. Corp. of NJ 9.83 9.81 0.81 8.48 5.30 0.80 8.41 0.51 84.18 0.87
STSA Sterling Financial Corp. of WA 5.60 5.22 0.54 10.92 4.80 0.47 9.53 0.72 68.74 0.83
SFSB SuburbFed Fin. Corp. of IL(8) 6.73 6.71 0.63 9.57 4.41 0.48 7.30 1.00 19.60 0.30
ROSE T R Financial Corp. of NY* 6.15 6.15 0.99 15.97 4.67 0.88 14.13 0.57 65.67 0.69
THRD TF Financial Corp. of PA 7.97 6.71 0.74 7.44 5.57 0.63 6.28 0.30 106.83 0.84
TPNZ Tappan Zee Fin., Inc. of NY(8) 17.02 17.02 0.84 4.86 3.48 0.81 4.65 1.24 43.88 1.20
TSBK Timberland Bancorp of WA 32.13 32.13 1.63 10.61 3.65 1.55 10.10 3.67 18.18 0.93
TRIC Tri-County Bancorp of WY 15.73 15.73 1.01 6.58 5.05 1.05 6.84 NA NA 0.98
TWIN Twin City Bancorp, Inc. of TN 12.75 12.75 1.03 8.01 6.29 0.86 6.64 0.10 102.83 0.14
USAB USABancshares, Inc of PA* 12.49 12.42 0.20 2.00 0.64 0.35 3.56 0.22 265.63 0.99
UCBC Union Community Bancorp of IN 40.02 40.02 1.44 5.52 3.20 1.44 5.52 0.45 51.96 0.30
UFRM United FSB of Rocky Mount NC(8) 7.49 7.49 0.61 8.23 3.05 0.40 5.34 0.64 137.38 1.02
UBMT United Fin. Corp. of MT 25.61 25.61 1.31 5.53 3.76 1.31 5.53 0.23 133.33 0.80
UTBI United Tenn. Bancshares of TN 26.99 26.99 1.01 6.08 3.83 1.01 6.08 0.59 142.44 1.31
WHGB WHG Bancshares of MD 19.66 19.66 0.76 3.59 3.22 0.77 3.65 1.06 24.18 0.39
WSFS WSFS Financial Corp. of DE* 5.73 5.69 1.11 20.40 6.16 1.10 20.25 1.38 117.99 3.31
WVFC WVS Financial Corp. of PA 10.66 10.66 1.31 11.04 5.49 1.32 11.15 0.20 310.17 1.14
WRNB Warren Bancorp of Peabody MA* 10.78 10.78 2.01 19.47 7.67 1.80 17.42 1.01 107.31 1.63
WSBI Warwick Community Bncrp of NY* 23.76 23.76 1.04 4.37 3.24 1.04 4.37 0.52 75.47 0.79
WFSL Washington Federal, Inc. of WA 12.90 11.90 1.87 15.50 7.41 1.85 15.35 0.75 55.29 0.56
WAMU Washington Mutual, Inc. of WA* 5.35 4.99 0.52 9.93 1.88 0.92 17.76 0.78 83.87 0.97
WYNE Wayne Bancorp, Inc. of NJ 12.57 12.57 0.76 5.59 3.07 0.76 5.59 0.90 91.95 1.18
WAYN Wayne Svgs Bks MHC of OH (47.8) 9.48 9.48 0.75 8.03 2.79 0.70 7.51 NA NA NA
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.49 23.49 1.46 6.23 3.31 1.46 6.23 0.12 353.21 0.70
WBST Webster Financial Corp. of CT 5.44 4.75 0.54 10.34 3.41 0.82 15.74 0.59 114.77 1.33
WEFC Wells Fin. Corp. of Wells MN 14.71 14.71 1.09 7.67 5.38 1.07 7.46 0.14 279.23 0.44
WCBI WestCo Bancorp, Inc. of IL 15.37 15.37 1.51 9.79 6.29 1.41 9.12 0.45 62.71 0.37
WSTR WesterFed Fin. Corp. of MT 10.40 8.45 0.81 7.26 5.31 0.78 7.04 0.64 76.69 0.75
WOFC Western Ohio Fin. Corp. of OH 14.68 13.71 0.04 0.26 0.23 0.08 0.61 0.91 115.97 1.44
WEHO Westwood Hmstd Fin Corp of OH 22.45 22.45 0.67 2.33 2.30 1.05 3.68 0.12 178.06 0.23
FFWD Wood Bancorp of OH 13.20 13.20 1.44 11.31 5.24 1.23 9.66 0.35 110.31 0.46
YFCB Yonkers Fin. Corp. of NY 13.54 13.54 1.05 7.10 5.60 1.03 6.96 0.41 87.23 0.77
YFED York Financial Corp. of PA 8.86 8.86 0.96 11.17 5.63 0.80 9.29 2.37 28.49 0.81
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ----- ----- --------
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(292) 19.96 159.57 20.19 165.76 20.78 0.33 1.56 29.76
NYSE Traded Companies(8) 17.45 194.14 19.45 201.52 18.56 0.21 0.62 9.08
AMEX Traded Companies(22) 20.76 135.63 18.97 137.82 20.55 0.31 1.71 33.40
NASDAQ Listed OTC Companies(261) 19.96 161.16 20.27 166.88 20.84 0.34 1.58 30.17
California Companies(19) 17.39 152.77 11.87 162.63 18.34 0.18 0.60 13.38
Florida Companies(6) 21.09 177.00 21.60 192.15 24.30 0.24 1.04 23.49
Mid-Atlantic Companies(58) 19.49 166.57 17.54 180.47 20.65 0.33 1.41 29.76
Mid-West Companies(134) 19.69 155.65 20.57 159.73 20.56 0.33 1.62 29.25
New England Companies(8) 19.29 165.44 12.33 174.76 19.64 0.36 1.60 29.45
North-West Companies(11) 22.27 165.69 26.33 171.16 23.14 0.32 1.35 30.72
South-East Companies(44) 21.84 167.21 25.31 167.42 22.21 0.40 2.01 39.17
South-West Companies(6) 14.46 144.68 15.36 150.30 14.54 0.29 1.33 26.42
Western Companies (Excl CA)(6) 23.51 126.20 24.11 132.06 23.42 0.47 2.10 36.89
Thrift Strategy(245) 20.24 152.49 20.91 157.35 20.83 0.34 1.65 31.12
Mortgage Banker Strategy(29) 18.79 204.03 15.43 224.00 21.24 0.29 1.02 23.00
Real Estate Strategy(8) 19.04 198.18 14.45 203.73 18.55 0.25 0.84 17.17
Diversified Strategy(7) 16.92 227.50 22.25 232.65 20.90 0.39 1.39 26.80
Retail Banking Strategy(3) 15.74 160.90 10.42 166.51 17.85 0.15 0.75 17.60
Companies Issuing Dividends(239) 20.00 162.70 20.14 168.75 20.95 0.41 1.91 36.58
Companies Without Dividends(53) 19.71 145.24 20.45 152.13 19.69 0.00 0.00 0.00
Equity/Assets less than 6%(21) 18.31 213.58 10.85 227.57 19.11 0.17 0.61 12.41
Equity/Assets 6-12%(133) 18.83 181.03 15.66 189.55 19.99 0.35 1.49 27.26
Equity/Assets greater than 12%(138) 21.45 131.88 25.69 134.96 21.90 0.34 1.77 34.70
Converted Last 3 Mths (no MHC)(11) 26.12 128.07 31.05 148.76 26.51 0.06 0.57 15.13
Actively Traded Companies(34) 18.13 207.36 18.60 219.08 19.12 0.44 1.50 29.13
Market Value Below $20 Million(43) 20.37 125.14 19.63 125.57 21.65 0.30 1.80 33.35
Holding Company Structure(267) 20.04 159.03 20.50 165.08 20.83 0.34 1.59 29.94
Assets Over $1 Billion(59) 18.68 194.87 16.67 213.81 19.59 0.34 1.15 23.48
Assets $500 Million-$1 Billion(40) 19.19 189.83 18.00 195.80 20.42 0.39 1.51 32.80
Assets $250-$500 Million(71) 19.84 159.06 19.71 164.75 20.66 0.31 1.39 26.27
Assets less than $250 Million(122) 20.92 135.28 22.69 136.00 21.54 0.33 1.85 33.93
Goodwill Companies(118) 19.31 179.67 17.21 193.78 20.28 0.35 1.40 25.91
Non-Goodwill Companies(174) 20.42 146.55 22.15 147.78 21.13 0.32 1.67 32.26
Acquirors of FSLIC Cases(8) 17.24 185.85 16.31 197.38 17.44 0.47 1.66 26.84
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by c
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ----- ----- --------
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(59) 18.43 190.04 20.51 192.16 19.62 0.42 1.54 29.58
NYSE Traded Companies(5) 23.52 191.03 28.35 185.97 25.92 0.54 1.25 34.54
AMEX Traded Companies(6) 19.80 171.04 19.25 178.20 19.10 0.39 1.72 30.98
NASDAQ Listed OTC Companies(48) 17.65 192.18 19.76 194.47 18.79 0.40 1.56 28.82
California Companies(1) 13.31 169.39 17.24 169.89 13.31 0.00 0.00 0.00
Mid-Atlantic Companies(21) 21.32 192.73 24.70 186.06 22.71 0.41 1.29 32.58
New England Companies(31) 17.72 195.26 17.65 202.89 17.58 0.41 1.62 27.95
North-West Companies(3) 16.23 195.63 19.62 195.63 20.86 0.61 1.78 29.52
South-East Companies(3) 13.00 128.32 22.66 129.70 23.44 0.41 2.70 38.86
Thrift Strategy(45) 18.75 181.17 21.47 178.37 19.86 0.42 1.59 31.26
Mortgage Banker Strategy(6) 18.01 208.71 16.92 223.23 19.65 0.29 1.17 21.00
Real Estate Strategy(3) 13.17 203.28 21.40 203.53 13.94 0.18 1.45 18.95
Diversified Strategy(5) 19.10 244.08 16.58 270.89 20.37 0.59 1.64 30.94
Companies Issuing Dividends(50) 18.69 197.22 20.16 199.99 19.96 0.48 1.77 34.18
Companies Without Dividends(9) 15.74 143.85 22.90 144.07 16.30 0.00 0.00 0.00
Equity/Assets less than 6%(5) 18.15 295.21 15.93 312.32 24.22 0.44 1.16 18.15
Equity/Assets 6-12%(37) 17.29 197.63 17.57 202.19 17.80 0.46 1.68 30.26
Equity/Assets greater than 12%(17) 22.46 151.44 27.41 143.33 23.26 0.32 1.40 31.08
Converted Last 3 Mths (no MHC)(2) 27.27 223.29 33.03 121.01 27.27 0.05 0.50 25.00
Actively Traded Companies(17) 16.62 202.74 19.25 218.25 18.90 0.62 1.82 30.73
Market Value Below $20 Million(1) 14.43 122.16 12.28 122.16 16.54 0.00 0.00 0.00
Holding Company Structure(47) 18.27 180.57 21.41 183.01 19.62 0.41 1.55 29.94
Assets Over $1 Billion(18) 20.47 212.95 22.35 224.07 22.06 0.58 1.54 35.12
Assets $500 Million-$1 Billion(14) 15.13 206.21 19.06 197.71 15.81 0.45 1.73 32.03
Assets $250-$500 Million(12) 17.77 173.58 19.63 177.12 18.75 0.26 1.41 24.43
Assets less than $250 Million(15) 18.87 169.51 20.11 171.09 19.35 0.32 1.52 25.91
Goodwill Companies(31) 17.74 200.77 18.90 206.10 19.72 0.42 1.45 28.69
Non-Goodwill Companies(27) 18.73 181.64 22.01 181.64 19.16 0.42 1.70 31.69
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by c
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ----- ----- --------
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(17) 28.09 223.65 30.22 229.41 0.00 0.37 1.53 37.82
BIF-Insured Thrifts(3) 26.48 230.64 24.80 263.39 27.38 0.35 1.03 29.54
NASDAQ Listed OTC Companies(20) 27.02 224.96 29.37 235.78 27.38 0.37 1.45 36.05
Florida Companies(2) 28.09 225.33 19.60 228.90 0.00 0.90 2.77 0.00
Mid-Atlantic Companies(10) 27.38 214.50 30.04 221.62 27.38 0.22 1.10 34.30
Mid-West Companies(5) 0.00 241.45 28.48 258.39 0.00 0.54 2.19 57.96
New England Companies(2) 25.59 242.84 30.20 267.06 0.00 0.42 1.10 28.19
South-East Companies(1) 0.00 195.68 44.00 195.68 0.00 0.00 0.00 0.00
Thrift Strategy(18) 27.74 220.67 29.00 228.99 27.38 0.35 1.44 34.03
Mortgage Banker Strategy(1) 0.00 0.00 38.29 0.00 0.00 0.22 0.86 40.00
Diversified Strategy(1) 25.59 289.30 26.71 337.73 0.00 0.84 2.20 56.38
Companies Issuing Dividends(16) 26.84 237.10 28.22 250.42 0.00 0.47 1.83 50.47
Companies Without Dividends(4) 27.38 172.33 33.68 172.33 27.38 0.00 0.00 0.00
Equity/Assets 6-12%(12) 26.84 255.89 27.48 275.13 0.00 0.43 1.50 43.71
Equity/Assets greater than 12%(8) 27.38 185.20 32.61 185.20 27.38 0.27 1.36 22.25
Holding Company Structure(3) 27.38 227.46 24.74 244.07 27.38 0.25 0.98 35.31
Assets Over $1 Billion(6) 27.02 210.42 26.80 224.31 27.38 0.35 1.17 26.55
Assets $500 Million-$1 Billion(2) 0.00 238.17 21.12 272.05 0.00 0.69 1.92 41.38
Assets $250-$500 Million(4) 0.00 273.45 33.02 273.45 0.00 0.34 1.51 36.84
Assets less than $250 Million(8) 0.00 208.71 31.83 215.83 0.00 0.31 1.52 42.82
Goodwill Companies(6) 26.84 263.69 27.21 306.97 0.00 0.47 1.54 41.28
Non-Goodwill Companies(14) 27.38 212.05 30.36 212.05 27.38 0.32 1.41 33.15
MHC Institutions(20) 27.02 224.96 29.37 235.78 27.38 0.37 1.45 36.05
MHC Converted Last 3 Months(3) 27.38 172.33 30.91 172.33 27.38 0.00 0.00 0.00
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances; ROI (return on investment) is current EPS divided by c
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ----- ----- --------
(X) (%) (%) (%) (x) ($) (%) (%)
NYSE Traded Companies
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA(8) 20.95 281.68 15.35 NM 22.23 0.88 1.15 24.18
BYS Bay State Bancorp of MA* 27.27 121.01 25.06 121.01 27.27 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 22.36 227.68 15.74 260.44 19.14 0.22 0.66 14.77
DME Dime Bancorp, Inc. of NY* 22.80 256.73 15.14 313.53 28.34 0.20 0.69 15.63
DSL Downey Financial Corp. of CA 18.41 208.63 15.85 211.02 18.01 0.32 0.97 17.78
FED FirstFed Fin. Corp. of CA 19.94 223.51 12.78 225.05 20.61 0.00 0.00 0.00
GSB Golden State Bancorp of CA(8) 18.78 203.24 12.27 225.22 17.33 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 16.56 219.42 15.57 219.42 16.49 0.50 0.46 7.67
GPT GreenPoint Fin. Corp. of NY* 24.52 271.88 26.30 NM 23.67 0.64 1.55 38.10
JSB JSB Financial, Inc. of NY* 19.47 160.85 37.34 160.85 21.91 1.60 2.77 53.87
OCN Ocwen Financial Corp. of FL 18.75 NM 48.22 NM NM 0.00 0.00 0.00
SIB Staten Island Bancorp of NY* NM 144.68 37.91 148.51 28.41 0.28 1.25 65.12
WES Westcorp Inc. of Orange CA 8.66 91.48 8.56 91.69 NM 0.20 1.65 14.29
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 20.18 131.50 20.18 131.50 21.50 0.44 1.91 38.60
ANE Alliance Bncp of New Eng of CT* 18.39 202.28 16.13 207.25 NM 0.13 0.81 14.94
BKC American Bank of Waterbury CT* 15.82 221.87 20.00 228.95 18.92 0.76 2.71 42.94
BFD BostonFed Bancorp of MA 17.98 156.07 12.29 161.91 21.25 0.40 1.71 30.77
CNY Carver Bancorp, Inc. of NY NM 89.44 7.59 92.97 NM 0.00 0.00 NM
CBK Citizens First Fin.Corp. of IL 25.64 130.98 18.12 130.98 NM 0.00 0.00 0.00
EFC EFC Bancorp Inc of IL 25.00 112.72 26.80 112.72 25.00 0.00 0.00 0.00
EBI Equality Bancorp, Inc. of MO 29.48 131.52 14.70 131.52 NM 0.24 1.77 52.17
ESX Essex Bancorp of Norfolk VA(8) NM NM 2.13 NM NM 0.00 0.00 NM
FCB Falmouth Bancorp, Inc. of MA* 29.41 123.53 27.68 123.53 NM 0.24 1.20 35.29
FAB FirstFed America Bancorp of MA NM 136.58 15.25 136.58 NM 0.00 0.00 0.00
GAF GA Financial Corp. of PA 18.53 135.06 18.92 136.32 19.60 0.56 2.75 50.91
HBS Haywood Bancshares, Inc. of NC* 13.00 126.69 18.82 130.82 13.00 0.60 2.62 34.09
KNK Kankakee Bancorp, Inc. of IL 15.80 124.28 11.99 149.40 16.24 0.48 1.38 21.82
KYF Kentucky First Bancorp of KY 19.94 140.12 23.87 140.12 20.19 0.50 3.17 63.29
MBB MSB Bancorp of Middletown NY(8)* NM 164.23 13.38 308.75 NM 0.56 1.56 70.00
NBN Northeast Bancorp of ME* 22.37 180.85 13.64 200.47 25.37 0.21 1.24 27.63
NEP Northeast PA Fin. Corp of PA NM 119.71 21.86 119.71 NM 0.00 0.00 0.00
PDB Piedmont Bancorp, Inc. of NC 17.54 128.70 20.71 128.70 17.86 0.40 4.00 70.18
SSB Scotland Bancorp, Inc. of NC 17.26 109.10 26.95 109.10 17.26 0.20 2.32 40.00
SZB SouthFirst Bancshares of AL 28.62 117.91 11.88 120.87 NM 0.60 3.04 NM
SRN Southern Banc Company of AL NM 109.43 18.69 110.40 NM 0.35 2.17 NM
SSM Stone Street Bancorp of NC 25.56 120.78 33.80 120.78 25.56 0.46 2.31 58.97
TSH Teche Holding Company of LA 18.35 122.10 16.89 122.10 18.52 0.50 2.50 45.87
FTF Texarkana Fst. Fin. Corp of AR 17.16 189.99 28.92 189.99 17.46 0.56 1.84 31.64
THR Three Rivers Fin. Corp. of MI 20.00 125.71 16.92 126.10 21.05 0.44 2.20 44.00
WSB Washington SB, FSB of MD 15.50 136.33 11.82 136.33 21.61 0.10 1.40 21.74
WFI Winton Financial Corp. of OH 20.31 280.17 20.10 286.09 24.62 0.25 1.54 31.25
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 15.38 130.35 11.76 132.51 22.58 0.27 0.96 14.84
FBER 1st Bergen Bancorp of NJ 24.68 142.17 16.62 142.17 24.68 0.20 1.04 25.64
AFED AFSALA Bancorp, Inc. of NY(8) 22.75 138.89 17.40 138.89 22.75 0.28 1.38 31.46
ALBK ALBANK Fin. Corp. of Albany NY 15.20 182.20 16.34 232.97 15.38 0.84 1.62 24.56
AMFC AMB Financial Corp. of IN 17.50 118.28 16.68 118.28 NM 0.28 1.52 26.67
ASBP ASB Financial Corp. of OH 22.06 136.33 20.72 136.33 22.40 0.40 2.75 60.61
ABBK Abington Bancorp of MA* 14.40 185.57 11.67 204.08 16.98 0.20 1.11 16.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ----- ----- --------
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AABC Access Anytime Bancorp of NM 9.38 158.31 12.81 158.31 10.08 0.00 0.00 0.00
AFBC Advance Fin. Bancorp of WV 20.37 124.86 17.60 124.86 21.58 0.32 1.77 35.96
AFCB Affiliated Comm BC, Inc of MA(8) 20.89 218.16 22.18 219.16 21.84 0.60 1.56 32.61
ALBC Albion Banc Corp. of Albion NY 23.33 126.81 10.83 126.81 24.42 0.12 1.14 26.67
ABCL Alliance Bancorp, Inc. of IL 17.62 165.92 14.26 167.85 17.18 0.44 1.61 28.39
ALLB Alliance Bank MHC of PA (19.9) NM NM 42.00 NM NM 0.00 0.00 0.00
AHCI Ambanc Holding Co., Inc. of NY* NM 134.48 15.72 134.48 NM 0.24 1.25 40.00
ASBI Ameriana Bancorp of IN 17.03 142.09 16.53 144.79 19.95 0.64 3.24 55.17
ABCW Anchor Bancorp Wisconsin of WI 18.51 296.78 19.00 301.64 20.77 0.36 0.85 15.72
ANDB Andover Bancorp, Inc. of MA* 16.16 201.83 16.00 201.83 16.63 0.72 2.10 33.96
ASFC Astoria Financial Corp. of NY 20.08 167.37 13.32 236.48 21.84 0.80 1.45 29.20
AVND Avondale Fin. Corp. of IL NM 130.71 9.93 130.71 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 16.70 215.89 21.66 215.89 19.41 0.54 2.65 44.26
BPLS Bank Plus Corp. of CA 20.87 135.21 5.94 147.72 17.97 0.00 0.00 0.00
BNKU Bank United Corp. of TX 15.20 241.90 12.05 267.67 15.97 0.64 1.28 19.45
BWFC Bank West Fin. Corp. of MI NM 159.57 20.75 159.57 NM 0.24 1.68 58.54
BANC BankAtlantic Bancorp of FL 16.98 208.97 12.86 249.55 NM 0.10 0.73 12.35
BKUNA BankUnited Fin. Corp. of FL NM 191.20 8.38 220.42 NM 0.00 0.00 0.00
BVCC Bay View Capital Corp. of CA NM 167.34 12.18 261.43 NM 0.40 1.24 58.82
FSNJ Bayonne Banchsares of NJ NM 152.87 24.08 152.87 NM 0.17 1.05 56.67
BFSB Bedford Bancshares, Inc. of VA 20.26 165.89 22.04 165.89 20.40 0.56 1.91 38.62
BFFC Big Foot Fin. Corp. of IL NM 127.17 23.25 127.17 NM 0.00 0.00 0.00
BYFC Broadway Fin. Corp. of CA 17.39 79.58 8.06 79.58 25.00 0.20 1.67 28.99
BRKL Brookline Bncp MHC of MA(47.0) NM 196.38 33.70 196.38 NM 0.00 0.00 0.00
CBES CBES Bancorp, Inc. of MO 18.16 120.53 17.16 120.53 21.91 0.40 1.88 34.19
CCFH CCF Holding Company of GA NM 185.44 15.01 185.44 NM 0.64 2.67 NM
CFSB CFSB Bancorp of Lansing MI 20.13 344.40 26.60 344.40 22.08 0.47 1.72 34.56
CKFB CKF Bancorp of Danville KY 14.18 121.72 25.96 121.72 18.81 0.50 2.63 37.31
CNSB CNS Bancorp, Inc. of MO NM 120.51 29.74 120.51 NM 0.24 1.36 44.44
CSBF CSB Financial Group Inc of IL NM 99.13 23.80 105.04 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 11.08 131.87 23.06 131.87 11.04 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 16.38 185.66 18.37 197.82 21.64 0.58 2.00 32.77
CMRN Cameron Fin. Corp. of MO 21.98 116.58 24.23 116.58 22.45 0.28 1.34 29.47
CAPS Capital Savings Bancorp of MO(8) 16.19 181.16 18.35 181.16 18.91 0.24 1.07 17.27
CFNC Carolina Fincorp of NC* NM 125.99 28.15 125.99 27.78 0.24 1.37 43.64
CASB Cascade Financial Corp. of WA 21.43 218.37 15.25 218.37 22.67 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 20.64 114.22 26.76 114.22 20.88 0.32 1.80 37.21
CAVB Cavalry Bancorp of TN NM 177.63 50.49 177.63 NM 0.00 0.00 0.00
CNIT Cenit Bancorp of Norfolk VA 18.99 241.38 16.60 261.75 20.42 0.40 1.63 31.01
CEBK Central Co-Op. Bank of MA* 20.03 154.99 15.22 171.43 21.88 0.32 1.13 22.54
CENB Century Bancorp, Inc. of NC(8) 18.63 135.46 24.05 135.46 18.63 0.68 3.44 64.15
COFI Charter One Financial of OH NM 306.08 22.56 326.50 21.82 0.56 1.64 49.56
CVAL Chester Valley Bancorp of PA 21.18 236.00 20.45 236.00 23.33 0.44 1.37 28.95
CTZN CitFed Bancorp of Dayton OH(8) 22.37 292.72 18.31 317.74 22.07 0.36 0.73 16.29
CLAS Classic Bancshares, Inc. of KY 19.20 104.88 15.79 122.94 16.46 0.28 1.74 33.33
CBSA Coastal Bancorp of Houston TX 13.60 175.40 6.54 203.49 13.23 0.48 1.25 16.96
CFCP Coastal Fin. Corp. of SC 18.25 332.89 20.09 332.89 22.12 0.36 1.44 26.28
CMSB Commonwealth Bancorp Inc of PA 24.61 176.21 16.08 220.43 NM 0.32 1.35 33.33
CMSV Commty. Svgs, MHC of FL (48.5) NM 219.62 23.72 219.62 NM 0.90 2.54 NM
CFTP Community Fed. Bancorp of MS NM 135.85 32.07 135.85 NM 0.32 1.78 54.24
CFFC Community Fin. Corp. of VA 20.38 152.46 20.78 153.09 20.11 0.00 0.00 0.00
CIBI Community Inv. Bancorp of OH 20.96 170.22 18.70 170.22 20.96 0.32 1.50 31.37
COOP Cooperative Bancshares of NC 24.01 186.99 14.28 186.99 26.45 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY 23.55 119.04 28.07 119.04 23.24 0.40 2.21 51.95
DNFC D&N Financial Corp. of MI 15.88 232.52 12.66 234.63 17.85 0.20 0.77 12.27
DCBI Delphos Citizens Bancorp of OH 22.80 140.58 35.08 140.58 22.80 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ----- ----- --------
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DIME Dime Community Bancorp of NY* NM 190.54 22.87 219.03 NM 0.36 1.24 38.30
DIBK Dime Financial Corp. of CT(8)* 12.00 226.80 18.40 232.42 12.08 0.00 0.00 0.00
ESBF ESB Financial Corp of PA 18.38 158.50 11.40 177.56 18.56 0.33 1.76 32.35
EGLB Eagle BancGroup of IL NM 110.36 12.66 110.36 NM 0.00 0.00 0.00
EBSI Eagle Bancshares of Tucker GA 23.96 179.69 14.08 179.69 23.71 0.60 2.61 62.50
ETFS East Texas Fin. Serv. of TX NM 115.91 20.21 115.91 NM 0.20 1.26 44.44
ESBK Elmira Svgs Bank (The) of NY* 21.64 153.44 9.53 153.44 20.42 0.64 2.21 47.76
EMLD Emerald Financial Corp. of OH 20.70 267.14 22.08 270.96 22.46 0.14 1.06 21.88
EFBC Empire Federal Bancorp of MT 27.67 107.79 39.85 107.79 27.67 0.32 1.90 52.46
EFBI Enterprise Fed. Bancorp of OH 29.68 200.55 21.56 200.68 NM 1.00 3.40 NM
EQSB Equitable FSB of Wheaton MD 16.67 217.54 11.27 217.54 17.22 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI 26.20 172.64 24.33 172.64 NM 0.88 2.69 70.40
FFDF FFD Financial Corp. of OH 21.56 152.30 33.92 152.30 NM 0.30 1.28 27.52
FFLC FFLC Bancorp of Leesburg FL 19.83 144.52 18.37 144.52 21.08 0.36 1.80 35.64
FFWC FFW Corporation of Wabash IN 13.58 131.38 12.59 143.15 14.02 0.36 2.09 28.35
FFYF FFY Financial Corp. of OH 16.84 156.10 20.44 156.10 17.11 0.80 2.46 41.45
FMCO FMS Financial Corp. of NJ 21.06 285.42 16.97 288.20 21.15 0.36 0.76 16.00
FFHH FSF Financial Corp. of MN 17.50 132.85 13.81 132.85 18.16 0.50 2.60 45.45
FOBC Fed One Bancorp of Wheeling WV(8) 29.26 218.71 24.58 227.82 29.49 0.62 1.64 48.06
FBCI Fidelity Bancorp of Chicago IL NM 128.31 13.84 128.52 21.99 0.40 1.68 NM
FSBI Fidelity Bancorp, Inc. of PA 17.52 177.59 12.14 177.59 17.77 0.36 1.45 25.35
FFFL Fidelity Bcsh MHC of FL (47.7) 28.09 231.05 15.48 238.19 NM 0.90 2.99 NM
FFED Fidelity Fed. Bancorp of IN NM 178.27 12.08 178.27 NM 0.40 5.24 NM
FFOH Fidelity Financial of OH 19.98 149.31 17.99 168.57 20.69 0.32 1.84 36.78
FIBC Financial Bancorp, Inc. of NY 16.90 166.65 15.06 167.36 17.33 0.00 0.00 0.00
FBSI First Bancshares, Inc. of MO 16.12 123.89 16.63 129.28 16.94 0.12 0.90 14.46
FBBC First Bell Bancorp of PA 17.61 177.17 19.88 177.17 18.08 0.40 1.98 34.78
SKBO First Carnegie MHC of PA(45.0) NM 185.10 31.83 185.10 NM 0.30 1.51 73.17
FSTC First Citizens Corp of GA 14.83 258.35 26.14 327.65 16.60 0.32 1.00 14.88
FCBK First Coastal Bankshares of VA(8) 21.11 200.22 14.29 200.22 27.60 0.00 0.00 0.00
FCME First Coastal Corp. of ME* 14.43 122.16 12.28 122.16 16.54 0.00 0.00 0.00
FFBA First Colorado Bancorp of CO(8) 24.15 229.10 30.83 233.80 25.45 0.52 1.82 44.07
FDEF First Defiance Fin.Corp. of OH 23.48 123.60 21.80 123.60 24.60 0.36 2.32 54.55
FESX First Essex Bancorp of MA* 16.73 188.17 13.25 213.41 18.35 0.56 2.46 41.18
FFSX First FSB MHC Sxld of IA(46.1) NM 256.72 18.51 324.48 NM 0.48 1.29 41.38
FFES First Fed of E. Hartford CT 17.70 146.48 10.13 146.48 15.95 0.68 1.84 32.54
BDJI First Fed. Bancorp. of MN 24.35 151.82 16.54 151.82 24.35 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 25.00 161.34 23.82 161.34 26.43 0.28 1.01 25.23
FTFC First Fed. Capital Corp. of WI 17.46 283.91 20.36 299.31 23.01 0.56 1.61 28.14
FFKY First Fed. Fin. Corp. of KY 18.09 211.21 27.90 223.03 18.58 0.56 2.04 36.84
FFBZ First Federal Bancorp of OH 22.20 251.46 19.16 251.71 22.39 0.28 1.09 24.14
FFCH First Fin. Holdings Inc. of SC 20.65 265.86 16.91 265.86 21.42 0.42 1.82 37.50
FFHS First Franklin Corp. of OH 16.43 143.63 13.28 144.35 18.96 0.27 1.57 25.71
FGHC First Georgia Hold. Corp of GA 25.44 326.58 26.43 NM 25.44 0.40 2.76 70.18
FSPG First Home Bancorp of NJ(8) 18.20 220.78 15.45 223.64 18.53 0.40 1.28 23.39
FFSL First Independence Corp. of KS 17.89 116.87 10.85 116.87 17.89 0.30 2.12 37.97
FISB First Indiana Corp. of IN 17.08 197.64 18.30 199.75 22.66 0.48 1.98 33.80
FKFS First Keystone Fin. Corp of PA 16.81 178.57 11.90 178.57 19.00 0.20 1.05 17.70
FLKY First Lancaster Bncshrs of KY NM 104.36 27.80 104.36 NM 0.50 3.21 NM
FLFC First Liberty Fin. Corp. of GA 28.66 282.11 21.41 310.44 27.65 0.30 1.28 36.59
CASH First Midwest Fin., Inc. of OH 27.56 152.32 15.83 171.26 NM 0.48 1.98 54.55
FMBD First Mutual Bancorp Inc of IL NM 110.29 15.61 142.44 NM 0.32 1.86 NM
FMSB First Mutual SB of Bellevue WA* 16.31 233.06 15.82 233.06 16.63 0.20 1.17 19.05
FNGB First Northern Cap. Corp of WI 19.29 160.14 17.78 160.14 20.45 0.36 2.67 51.43
FFPB First Palm Beach Bancorp of FL 23.55 190.98 12.17 195.32 NM 0.70 1.60 37.63
FWWB First Savings Bancorp of WA 20.54 172.88 23.12 186.59 21.75 0.36 1.39 28.57
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ----- ----- --------
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FSFF First SecurityFed Fin of IL NM 116.81 33.98 117.21 NM 0.00 0.00 0.00
SHEN First Shenango Bancorp of PA(8) 20.71 186.38 22.32 186.38 20.33 0.60 1.38 28.57
FSLA First Source Bancorp of NJ 24.71 131.22 26.96 131.22 24.71 0.12 1.18 29.27
SOPN First Svgs Bancorp of NC 16.61 124.93 28.77 124.93 16.61 1.00 4.30 71.43
FBNW FirstBank Corp of Clarkston WA 24.57 139.66 22.84 139.66 NM 0.32 1.51 37.21
FFDB FirstFed Bancorp, Inc. of AL 16.55 163.33 15.83 177.92 16.55 0.50 2.04 33.78
FSPT FirstSpartan Fin. Corp. of SC NM 153.36 40.32 153.36 NM 0.60 1.31 39.47
FLAG Flag Financial Corp of GA NM 317.68 28.28 317.68 NM 0.34 1.48 50.75
FLGS Flagstar Bancorp, Inc of MI 13.05 244.42 12.73 252.43 13.05 0.28 1.17 15.30
FFIC Flushing Fin. Corp. of NY* 24.01 154.85 19.69 161.01 23.80 0.32 1.18 28.32
FBHC Fort Bend Holding Corp. of TX(8) 16.31 187.14 12.67 199.65 22.12 0.40 1.74 28.37
FTSB Fort Thomas Fin. Corp. of KY 18.60 140.29 22.12 140.29 18.60 0.25 1.64 30.49
FKKY Frankfort First Bancorp of KY NM 118.19 20.04 118.19 25.38 0.80 4.85 NM
FTNB Fulton Bancorp, Inc. of MO 26.51 132.01 30.85 132.01 NM 0.24 1.21 32.00
GUPB GFSB Bancorp, Inc of Gallup NM 19.62 127.68 15.75 127.68 19.62 0.27 1.74 34.18
GSLA GS Financial Corp. of LA NM 111.94 46.60 111.94 NM 0.28 1.56 50.00
GOSB GSB Financial Corp. of NY* NM 119.29 33.57 119.29 NM 0.00 0.00 0.00
GBNK Gaston Fed Bncp MHC of NC(47.0) NM 195.68 44.00 195.68 NM 0.00 0.00 0.00
GFCO Glenway Financial Corp. of OH 20.05 176.59 16.90 178.14 20.23 0.44 1.98 39.64
GTPS Great American Bancorp of IL NM 127.37 23.35 127.37 NM 0.44 2.05 NM
PEDE Great Pee Dee Bancorp of SC 27.68 114.73 43.44 114.73 27.68 0.30 1.94 53.57
GSBC Great Southern Bancorp of MO 14.98 311.79 25.55 314.06 16.72 0.44 1.70 25.43
GSFC Green Street Fin. Corp. of NC 24.82 110.60 39.57 110.60 24.82 0.44 2.69 66.67
GFED Guaranty Fed Bancshares of MO NM 118.20 33.49 118.20 NM 0.60 4.53 NM
HCBB HCB Bancshares of Camden AR NM 108.17 20.17 112.12 NM 0.20 1.28 NM
HEMT HF Bancorp of Hemet CA NM 133.76 10.51 157.64 NM 0.00 0.00 NM
HFFC HF Financial Corp. of SD 17.06 190.58 18.52 190.58 18.27 0.42 1.17 19.91
HFNC HFNC Financial Corp. of NC(8) 18.04 128.62 22.17 128.62 26.31 0.32 2.53 45.71
HMNF HMN Financial, Inc. of MN 19.76 134.55 15.61 144.61 27.85 0.16 0.87 17.20
HALL Hallmark Capital Corp. of WI 15.66 135.03 10.37 135.03 16.53 0.00 0.00 0.00
HRBF Harbor Federal Bancorp of MD 23.74 135.68 17.21 135.68 24.74 0.52 2.21 52.53
HARB Harbor Florida Bancshrs of FL 26.34 149.34 29.59 150.98 27.51 0.26 2.10 55.32
HFSA Hardin Bancorp of Hardin MO 18.28 118.46 13.18 118.46 21.30 0.52 2.68 49.06
HARL Harleysville SB of PA 15.75 223.40 14.90 223.40 15.75 0.44 1.34 21.15
HFGI Harrington Fin. Group of IN NM 155.62 6.88 155.62 NM 0.12 1.04 NM
HARS Harris Fin. MHC of PA (24.3) NM NM 38.29 NM NM 0.22 0.86 40.00
HFFB Harrodsburg 1st Fin Bcrp of KY 22.21 114.13 30.20 114.13 22.21 0.40 2.37 52.63
HHFC Harvest Home Fin. Corp. of OH 19.74 129.09 14.35 129.09 22.73 0.44 2.93 57.89
HAVN Haven Bancorp of Woodhaven NY 23.66 205.27 11.60 205.75 23.87 0.30 1.13 26.79
HTHR Hawthorne Fin. Corp. of CA 6.81 135.96 5.78 135.96 5.81 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL 22.21 122.04 19.77 122.04 22.21 0.28 1.48 32.94
HBSC Heritage Bancorp, Inc of SC 26.92 108.19 31.14 108.19 26.92 0.00 0.00 0.00
HFWA Heritage Financial Corp of WA NM 160.02 46.09 160.02 NM 0.14 0.92 37.84
HCBC High Country Bancorp of CO 28.77 111.80 21.87 111.80 28.77 0.00 0.00 0.00
HBNK Highland Bancorp of CA 14.52 225.21 17.66 225.21 16.70 1.00 2.37 34.36
HIFS Hingham Inst. for Sav. of MA* 17.50 218.23 20.68 218.23 17.50 0.52 1.41 24.76
HBEI Home Bancorp of Elgin IL(8) NM 124.59 32.29 124.59 NM 0.40 2.30 NM
HBFW Home Bancorp of Fort Wayne IN 26.00 180.26 21.69 180.26 26.64 0.20 0.62 16.00
HCFC Home City Fin. Corp. of OH 16.30 106.06 19.71 106.06 16.30 0.36 2.16 35.29
HOMF Home Fed Bancorp of Seymour IN 16.61 255.97 23.54 263.04 20.49 0.40 1.24 20.51
HWEN Home Financial Bancorp of IN 20.83 108.97 19.60 108.97 26.52 0.10 1.14 23.81
HLFC Home Loan Financial Corp of OH NM 113.97 44.38 113.97 NM 0.00 0.00 0.00
HPBC Home Port Bancorp, Inc. of MA* 15.34 208.68 20.40 208.68 13.81 0.80 3.20 49.08
HFBC HopFed Bancorp of KY NM 143.76 37.35 143.76 NM 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA 17.92 168.02 15.31 168.02 23.38 0.18 1.12 20.00
HRZB Horizon Financial Corp. of WA* 16.14 158.20 24.26 158.20 16.28 0.44 2.48 40.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ----- ----- --------
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
IBSF IBS Financial Corp. of NJ(8) NM 157.43 27.32 157.43 NM 0.40 2.13 72.73
ITLA ITLA Capital Corp of CA* 13.31 169.39 17.24 169.89 13.31 0.00 0.00 0.00
ICBC Independence Comm Bnk Cp of NY NM 138.49 30.05 147.91 NM 0.00 0.00 0.00
IFSB Independence FSB of DC 15.60 119.47 8.66 134.18 NM 0.25 1.47 22.94
INBI Industrial Bancorp of OH 20.33 172.49 28.43 172.49 20.33 0.60 2.87 58.25
IWBK Interwest Bancorp of WA 19.01 271.77 18.37 276.04 22.48 0.76 1.67 31.67
IPSW Ipswich SB of Ipswich MA* 16.98 342.86 18.11 342.86 22.50 0.16 0.89 15.09
JXVL Jacksonville Bancorp of TX 15.24 146.12 21.52 146.12 15.24 0.50 2.39 36.50
JXSB Jcksnville SB,MHC of IL (45.6) NM 243.77 25.31 243.77 NM 0.30 1.33 58.82
JSBA Jefferson Svgs Bancorp of MO NM 273.71 25.70 344.36 NM 0.28 0.88 27.45
JOAC Joachim Bancorp, Inc. of MO(8) NM 119.47 34.55 119.47 NM 0.50 3.05 NM
KSBK KSB Bancorp of Kingfield ME* 15.53 212.91 15.67 223.92 15.53 0.10 0.54 8.33
KFBI Klamath First Bancorp of OR 23.31 132.33 19.87 144.18 23.31 0.34 1.72 40.00
LSBI LSB Fin. Corp. of Lafayette IN 17.54 159.95 13.46 159.95 19.60 0.40 1.26 22.10
LVSB Lakeview Financial of NJ 12.91 200.00 19.30 243.78 20.61 0.25 1.06 13.74
LARK Landmark Bancshares, Inc of KS 18.12 137.68 19.44 137.68 20.61 0.60 2.22 40.27
LARL Laurel Capital Group of PA 14.75 194.50 20.68 194.50 15.07 0.52 2.54 37.41
LSBX Lawrence Savings Bank of MA* 7.95 176.09 19.61 176.09 8.07 0.00 0.00 0.00
LFED Leeds Fed Bksr MHC of MD (36.3) NM 212.71 35.10 212.71 NM 0.56 2.77 NM
LXMO Lexington B&L Fin. Corp. of MO 25.40 103.69 18.68 110.53 25.40 0.30 1.90 48.39
LFCO Life Financial Corp of CA(8) 8.99 218.12 32.97 218.12 8.67 0.00 0.00 0.00
LFBI Little Falls Bancorp of NJ 27.51 141.01 14.38 152.70 28.65 0.20 0.97 26.67
LOGN Logansport Fin. Corp. of IN 18.50 138.99 26.21 138.99 18.14 0.40 2.16 40.00
LISB Long Island Bancorp, Inc of NY(8) 28.21 262.34 23.49 264.58 NM 0.60 0.97 27.40
MAFB MAF Bancorp, Inc. of IL 14.98 208.79 16.16 235.35 15.41 0.42 1.11 16.67
MBLF MBLA Financial Corp. of MO 16.87 106.49 13.50 106.49 16.53 0.40 1.66 27.97
MECH MECH Financial Inc of CT* 12.00 174.33 16.72 174.33 12.00 0.60 2.01 24.10
MFBC MFB Corp. of Mishawaka IN 20.61 130.37 15.35 130.37 20.93 0.34 1.26 25.95
MSBF MSB Financial, Inc of MI 16.75 150.88 25.19 150.88 18.90 0.30 1.85 30.93
MARN Marion Capital Holdings of IN 20.62 126.68 26.03 129.41 20.62 0.88 3.12 64.23
MRKF Market Fin. Corp. of OH 29.17 91.80 32.38 91.80 29.17 0.28 2.00 58.33
MFSL Maryland Fed. Bancorp of MD(8) NM 242.69 21.27 245.13 24.38 0.45 1.15 39.47
MASB MassBank Corp. of Reading MA* 16.84 165.83 19.10 168.14 18.68 1.00 2.02 34.01
MFLR Mayflower Co-Op. Bank of MA* 16.03 174.70 17.04 177.30 16.89 0.80 3.20 51.28
MDBK Medford Bancorp, Inc. of MA* 16.35 186.49 17.22 197.31 17.35 0.80 1.88 30.77
MWBX MetroWest Bank of MA* 14.24 234.45 16.91 234.45 14.51 0.12 1.56 22.22
METF Metropolitan Fin. Corp. of OH 16.81 288.38 11.14 311.98 19.06 0.00 0.00 0.00
MIFC Mid Iowa Financial Corp. of IA 13.20 155.63 13.78 155.84 12.24 0.08 0.68 8.99
MCBN Mid-Coast Bancorp of ME 17.16 153.33 12.99 153.33 18.55 0.17 1.48 25.37
MWBI Midwest Bancshares, Inc. of IA 12.31 149.25 10.29 149.25 14.05 0.00 0.00 0.00
MFFC Milton Fed. Fin. Corp. of OH 25.40 139.13 15.79 139.13 28.57 0.60 3.75 NM
MBSP Mitchell Bancorp, Inc. of NC NM 107.37 42.22 107.37 NM 0.40 2.39 74.07
MBBC Monterey Bay Bancorp of CA NM 146.27 17.08 156.36 NM 0.14 0.64 25.45
MONT Montgomery Fin. Corp. of IN 25.76 106.89 19.51 106.89 25.76 0.22 1.71 44.00
MSBK Mutual SB, FSB of Bay City MI NM 159.54 8.09 159.54 NM 0.00 0.00 NM
MYST Mystic Financial of MA* 29.33 115.53 22.02 115.53 NM 0.20 1.31 38.46
NHTB NH Thrift Bancshares of NH 14.43 158.18 12.80 182.10 15.58 0.60 3.06 44.12
NSLB NS&L Bancorp, Inc of Neosho MO 29.66 104.54 19.63 105.29 29.66 0.50 2.86 NM
NSSY NSS Bancorp of CT* 15.02 185.83 15.08 190.93 13.28 0.52 1.22 18.37
NMSB Newmil Bancorp, Inc. of CT* 18.24 157.16 14.00 157.16 18.49 0.32 2.37 43.24
NBCP Niagara Bancorp of NY MHC(45.4)* 27.38 124.94 15.03 124.94 27.38 0.00 0.00 0.00
NBSI North Bancshares of Chicago IL NM 159.81 18.30 159.81 NM 0.40 2.36 NM
FFFD North Central Bancshares of IA 18.53 136.77 21.10 157.16 18.53 0.32 1.49 27.59
NEIB Northeast Indiana Bncrp of IN 16.54 139.06 18.55 139.06 16.54 0.34 1.55 25.56
NWSB Northwest Bcrp MHC of PA (30.7) NM NM 31.59 NM NM 0.16 0.98 36.36
NWEQ Northwest Equity Corp. of WI 16.96 150.25 17.44 150.25 17.68 0.64 3.09 52.46
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ----- ----- --------
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NTMG Nutmeg FS&LA of CT 19.09 165.35 9.65 165.35 27.20 0.20 1.84 35.09
OHSL OHSL Financial Corp. of OH 20.43 157.42 16.61 157.42 22.04 0.44 2.63 53.66
OCFC Ocean Fin. Corp. of NJ 21.39 138.49 19.69 138.49 21.39 0.48 2.49 53.33
OTFC Oregon Trail Fin. Corp. of OR 24.46 108.41 28.03 108.41 24.10 0.20 1.20 29.41
OFCP Ottawa Financial Corp. of MI 20.23 200.21 16.92 244.38 21.90 0.40 1.37 27.78
PFFB PFF Bancorp of Pomona CA 20.81 131.28 11.87 132.61 22.23 0.00 0.00 0.00
PSFI PS Financial of Chicago IL NM 122.33 34.02 122.33 18.58 0.00 0.00 0.00
PVFC PVF Capital Corp. of OH 13.66 233.69 16.83 233.69 14.48 0.00 0.00 0.00
PBCI Pamrapo Bancorp, Inc. of NJ 16.47 165.70 21.24 166.57 17.07 1.12 3.93 64.74
PFED Park Bancorp of Chicago IL 26.38 108.08 21.52 108.08 24.59 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 15.05 198.19 15.49 199.18 15.05 0.60 1.89 28.44
PBHC Pathfinder BC MHC of NY (46.1)* NM 277.67 32.66 327.50 NM 0.20 0.88 32.26
PEEK Peekskill Fin. Corp. of NY 27.78 117.29 26.96 117.29 26.92 0.36 2.06 57.14
PFSB PennFed Fin. Services of NJ 15.22 159.67 11.49 184.21 15.63 0.14 0.80 12.17
PWBK Pennwood Bancorp, Inc. of PA 29.50 127.26 23.33 127.26 24.58 0.27 1.83 54.00
PBKB People's Bancshares of MA* 16.59 275.94 10.13 285.81 NM 0.52 1.97 32.70
TSBS Peoples Bancorp Inc of NJ* NM 325.57 41.01 NM NM 0.10 0.99 50.00
PFDC Peoples Bancorp of Auburn IN 17.05 163.81 24.72 163.81 17.05 0.44 2.00 34.11
PBCT Peoples Bank, MHC of CT (40.1)* 25.59 289.30 26.71 337.73 NM 0.84 2.20 56.38
PFFC Peoples Fin. Corp. of OH 20.51 138.43 26.51 138.43 NM 0.60 3.90 NM
PHBK Peoples Heritage Fin Grp of ME* 16.42 255.10 17.13 335.32 16.54 0.44 1.96 32.12
PSFC Peoples Sidney Fin. Corp of OH 28.87 137.86 34.68 137.86 28.87 0.28 1.37 39.44
PERM Permanent Bancorp, Inc. of IN 26.19 165.33 16.53 167.34 26.61 0.22 1.33 34.92
PMFI Perpetual Midwest Fin. of IA(8) 25.00 146.98 13.22 146.98 27.53 0.30 1.10 27.52
PCBC Perry Co. Fin. Corp. of MO 23.08 121.89 23.09 121.89 23.30 0.50 2.08 48.08
PHFC Pittsburgh Home Fin Corp of PA 15.85 139.00 10.33 140.65 18.68 0.24 1.35 21.43
PFSL Pocahontas Bancorp of AR 27.61 113.99 16.54 113.99 28.40 0.24 2.41 66.67
PTRS Potters Financial Corp of OH 18.56 164.47 14.32 164.47 19.13 0.24 1.28 23.76
PHSB Ppls Home SB, MHC of PA (45.0) NM 196.03 25.02 196.03 NM 0.24 1.19 38.10
PRBC Prestige Bancorp of PA NM 141.67 13.92 141.67 NM 0.17 0.80 24.29
PFNC Progress Financial Corp. of PA 21.91 306.12 16.90 345.13 24.38 0.12 0.62 13.48
PSBK Progressive Bank, Inc. of NY(8)* 18.53 198.89 17.70 217.97 18.44 0.80 1.95 36.04
PROV Provident Fin. Holdings of CA 21.46 125.28 13.89 125.28 NM 0.00 0.00 0.00
PULB Pulaski Bk,SB MHC of MO (29.8)(8) NM NM 53.09 NM NM 1.10 2.42 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 177.20 20.44 177.20 NM 0.30 1.62 54.55
PULS Pulse Bancorp of S. River NJ 15.27 190.95 15.92 190.95 15.10 0.80 2.90 44.20
QCFB QCF Bancorp of Virginia MN 16.62 153.94 27.05 153.94 16.62 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 16.39 137.11 12.00 137.11 16.89 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 29.33 NM 40.47 NM 29.73 1.00 2.27 66.67
RARB Raritan Bancorp of Raritan NJ* 17.58 219.36 16.54 222.22 17.90 0.60 2.07 36.36
REDF RedFed Bancorp of Redlands CA(8) 13.20 168.25 14.43 168.81 12.78 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 19.79 189.72 16.87 274.95 18.72 0.72 1.89 37.31
RELI Reliance Bancshares Inc of WI NM 87.33 43.64 87.33 NM 0.00 0.00 0.00
RCBK Richmond County Fin Corp of NY NM 155.61 34.30 156.25 25.68 0.20 1.05 NM
RIVR River Valley Bancorp of IN 16.71 121.56 15.96 123.27 19.98 0.20 1.09 18.18
RVSB Riverview Bancorp of WA 26.17 168.68 37.73 174.48 27.46 0.14 0.84 21.88
RSLN Roslyn Bancorp, Inc. of NY* 22.84 162.16 27.19 162.95 23.77 0.34 1.44 33.01
SCCB S. Carolina Comm. Bnshrs of SC 26.88 132.15 26.93 132.15 26.88 0.64 2.98 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 327.87 28.47 327.87 NM 0.24 1.20 NM
SFED SFS Bancorp of Schenectady NY 23.91 122.56 15.15 122.56 24.72 0.32 1.45 34.78
SGVB SGV Bancorp of W. Covina CA 26.89 131.58 10.38 133.36 23.67 0.00 0.00 0.00
SISB SIS Bancorp, Inc. of MA* 27.02 227.73 16.27 227.73 20.94 0.64 1.53 41.29
SWCB Sandwich Bancorp of MA(8)* 24.71 290.35 23.47 299.81 25.71 1.40 2.20 54.47
SFSL Security First Corp. of OH(8) 19.62 281.89 26.60 285.90 19.62 0.36 1.49 29.27
SKAN Skaneateles Bancorp Inc of NY* 15.40 138.22 9.64 141.86 15.83 0.28 1.62 25.00
SOBI Sobieski Bancorp of S. Bend IN NM 116.10 16.37 116.10 NM 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of May 29, 1998
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------ ------ ------ -------- ----- ----- --------
(X) (%) (%) (%) (x) ($) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SOSA Somerset Savings Bank of MA(8)* 11.15 222.08 16.10 222.08 11.66 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* NM 132.29 21.01 132.29 29.55 0.40 4.10 NM
SBAN SouthBanc Shares Inc. of SC(8) 27.23 116.87 25.54 116.87 27.23 1.40 7.04 NM
SCBS Southern Commun. Bncshrs of AL 23.93 131.58 26.87 131.58 23.93 0.00 0.00 0.00
SMBC Southern Missouri Bncrp of MO NM 131.06 21.98 131.06 NM 0.50 2.32 71.43
SWBI Southwest Bancshares of IL(8) 20.62 193.83 22.53 193.83 21.03 0.80 2.52 51.95
SVRN Sovereign Bancorp, Inc. of PA NM 264.03 12.99 307.65 25.27 0.08 0.45 17.39
STFR St. Francis Cap. Corp. of WI 16.63 163.37 13.07 182.85 17.26 0.56 1.36 22.58
SPBC St. Paul Bancorp, Inc. of IL 17.53 202.32 18.90 203.14 17.91 0.40 1.58 27.78
SFFC StateFed Financial Corp. of IA 20.54 141.54 25.09 141.54 20.54 0.20 1.39 28.57
SFIN Statewide Fin. Corp. of NJ 18.85 157.64 15.50 157.97 19.01 0.44 1.91 36.07
STSA Sterling Financial Corp. of WA 20.83 188.44 10.56 202.23 23.86 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL(8) 22.67 206.13 13.87 206.74 29.73 0.32 0.66 14.88
ROSE T R Financial Corp. of NY* 21.41 318.51 19.58 318.51 24.19 0.72 1.61 34.45
THRD TF Financial Corp. of PA 17.95 164.98 13.16 195.99 21.27 0.48 1.82 32.65
TPNZ Tappan Zee Fin., Inc. of NY(8) 28.76 138.26 23.52 138.26 NM 0.28 1.39 40.00
TSBK Timberland Bancorp of WA 27.38 125.09 40.19 125.09 28.75 0.24 1.39 38.10
TRIC Tri-County Bancorp of WY 19.81 126.77 19.94 126.77 19.06 0.44 2.89 57.14
TWIN Twin City Bancorp, Inc. of TN 15.91 125.34 15.98 125.34 19.18 0.40 2.86 45.45
USAB USABancshares, Inc of PA* NM 164.13 20.51 165.09 NM 0.00 0.00 0.00
UCBC Union Community Bancorp of IN NM 103.31 41.35 103.31 NM 0.30 2.04 63.83
UFRM United FSB of Rocky Mount NC(8) NM 251.99 18.89 251.99 NM 0.24 1.36 44.44
UBMT United Fin. Corp. of MT 26.58 146.33 37.48 146.33 26.58 1.00 3.39 NM
UTBI United Tenn. Bancshares of TN 26.11 106.90 28.85 106.90 26.11 1.20 8.06 NM
WHGB WHG Bancshares of MD NM 116.81 22.96 116.81 NM 0.32 1.91 59.26
WSFS WSFS Financial Corp. of DE* 16.22 305.32 17.48 307.08 16.35 0.12 0.56 9.16
WVFC WVS Financial Corp. of PA 18.20 217.77 23.22 217.77 18.03 0.60 3.20 58.25
WRNB Warren Bancorp of Peabody MA* 13.03 237.16 25.57 237.16 14.56 0.36 2.91 37.89
WSBI Warwick Community Bncrp of NY* NM 134.92 32.06 134.92 NM 0.00 0.00 0.00
WFSL Washington Federal, Inc. of WA 13.50 197.80 25.51 214.42 13.63 0.88 3.16 42.72
WAMU Washington Mutual, Inc. of WA* NM NM 18.78 NM 29.68 1.20 1.70 NM
WYNE Wayne Bancorp, Inc. of NJ NM 187.60 23.58 187.60 NM 0.20 0.63 20.62
WAYN Wayne Svgs Bks MHC of OH (47.8) NM 279.77 26.53 279.77 NM 0.56 2.06 73.68
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 185.54 43.58 185.54 NM 0.80 4.08 NM
WBST Webster Financial Corp. of CT 29.35 242.11 13.18 277.55 19.29 0.44 1.30 38.26
WEFC Wells Fin. Corp. of Wells MN 18.58 138.80 20.42 138.80 19.09 0.60 2.86 53.10
WCBI WestCo Bancorp, Inc. of IL 15.91 153.98 23.67 153.98 17.07 0.68 2.24 35.60
WSTR WesterFed Fin. Corp. of MT 18.85 127.07 13.22 156.35 19.44 0.50 2.04 38.46
WOFC Western Ohio Fin. Corp. of OH NM 112.02 16.44 119.87 NM 1.00 3.85 NM
WEHO Westwood Hmstd Fin Corp of OH NM 127.36 28.59 127.36 27.55 0.36 2.67 NM
FFWD Wood Bancorp of OH 19.10 207.82 27.42 207.82 22.37 0.34 2.00 38.20
YFCB Yonkers Fin. Corp. of NY 17.84 123.36 16.71 123.36 18.20 0.28 1.52 27.18
YFED York Financial Corp. of PA 17.75 189.01 16.75 189.01 21.34 0.52 2.34 41.60
</TABLE>
<PAGE>
EXHIBIT IV-2
Historical Stock Price Indices
<PAGE>
Exhibit IV-2
Historical Stock Price Indices(1)
SNL SNL
NASDAQ Thrift Bank
Year/Qtr. Ended DJIA S&P 500 Composite Index Index
- --------------- ---- ------- --------- ------ -----
1991: Quarter 1 2881.1 375.2 482.3 125.5 66.0
Quarter 2 2957.7 371.2 475.9 130.5 82.0
Quarter 3 3018.2 387.9 526.9 141.8 90.7
Quarter 4 3168.0 417.1 586.3 144.7 103.1
1992: Quarter 1 3235.5 403.7 603.8 157.0 113.3
Quarter 2 3318.5 408.1 563.6 173.3 119.7
Quarter 3 3271.7 417.8 583.3 167.0 117.1
Quarter 4 3301.1 435.7 677.0 201.1 136.7
1993: Quarter 1 3435.1 451.7 690.1 228.2 151.4
Quarter 2 3516.1 450.5 704.0 219.8 147.0
Quarter 3 3555.1 458.9 762.8 258.4 154.3
Quarter 4 3754.1 466.5 776.8 252.5 146.2
1994: Quarter 1 3625.1 445.8 743.5 241.6 143.1
Quarter 2 3625.0 444.3 706.0 269.6 152.6
Quarter 3 3843.2 462.6 764.3 279.7 149.2
Quarter 4 3834.4 459.3 752.0 244.7 137.6
1995: Quarter 1 4157.7 500.7 817.2 278.4 152.1
Quarter 2 4556.1 544.8 933.5 313.5 171.7
Quarter 3 4789.1 584.4 1043.5 362.3 195.3
Quarter 4 5117.1 615.9 1052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1101.4 382.1 225.1
Quarter 2 5654.6 670.6 1185.0 387.2 224.7
Quarter 3 5882.2 687.3 1226.9 429.3 249.2
Quarter 4 6442.5 737.0 1280.7 483.6 280.1
1997: Quarter 1 6583.5 757.1 1221.7 527.7 292.5
Quarter 2 7672.8 885.1 1442.1 624.5 333.3
Quarter 3 7945.3 947.3 1685.7 737.5 381.7
Quarter 4 7908.3 970.4 1570.4 814.1 414.9
1998: Quarter 1 8799.8 1101.8 1835.7 869.3 456.1
May 29, 1998 8900.0 1090.8 1778.9 867.4 464.4
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Historical Thrift Stock Indices
<PAGE>
ThriftINVESTOR
Index Values
Index Values Percent Change Since
----------------------------------- --------------------
04/30/98 1 Month YTD LTM 1 Month YTD LTM
- --------------------------------------------------------------------------------
All Pub. Traded Thrifts 882.1 869.3 814.1 537.2 1.46 8.35 64.19
MHC Index 1,263.7 1,252.7 1,179.9 587.7 0.88 7.10 115.04
Insurance Indices
- --------------------------------------------------------------------------------
SAIF Thrifts 827.9 815.9 764.4 484.2 1.48 8.30 70.99
BIF Thrifts 1,067.4 1,052.3 984.4 689.7 1.44 8.44 54.77
Stock Exchange Indices
- --------------------------------------------------------------------------------
AMEX Thrifts 272.9 264.6 255.4 166.7 3.14 6.86 63.71
NYSE Thrifts 566.1 549.2 521.3 314.7 3.09 8.59 79.86
OTC Thrifts 987.3 979.4 911.5 622.5 0.81 8.31 58.61
Geographic Indices
- --------------------------------------------------------------------------------
Mid-Atlantic Thrifts 1,911.2 1,833.2 1,735.2 1,077.4 4.25 10.15 77.40
Midwestern Thrifts 1,971.0 1,948.7 1,832.9 1,234.5 1.14 7.53 59.65
New England Thrifts 821.0 809.8 778.3 458.4 1.37 5.48 79.10
Southeastern Thrifts 786.9 799.9 776.0 499.4 -1.63 1.40 57.57
Southwestern Thrifts 573.4 558.6 533.5 347.5 2.65 7.47 64.98
Western Thrifts 850.3 848.8 778.8 539.7 0.18 9.17 57.55
Asset Size Indices
- --------------------------------------------------------------------------------
Less than $250M 915.8 907.7 869.9 639.4 0.89 5.27 43.21
$250M to $500M 1,393.0 1,371.7 1,312.3 865.2 1.56 6.15 61.00
$500M to $1B 902.6 892.2 846.8 558.9 1.16 6.58 61.49
$1B to $5B 1,051.7 1,022.5 956.8 593.8 2.86 9.92 77.12
Over $5B 555.5 550.0 512.3 344.1 1.00 8.44 61.45
Comparative Indices
- --------------------------------------------------------------------------------
Dow Jones Industrials 9,063.4 8,799.6 7,908.3 7,009.0 3.00 14.61 29.31
S&P 500 1,111.8 1,101.8 970.4 801.3 0.91 14.56 38.74
All SNL indices are market-vaiue weighted; i.e.. an institution's effect on an
index is proportionate to that institution's market capitalization. All SNL
thrift indices, except for the SNL MHC Index, began at 100 on March 30, 1984.
The SNL MHC Index began at 201.082 on Dec. 31, 1992, the level of the SNL Thrift
Index on that date. On March 30, 1984, the S&P 500 closed at 159.2 and the Dow
Jones Industrials stood at 1164.9.
Mid-Atlantic: DE, DC, MD, NJ, NY, PA, PR;
Midwest: IA, IL, IN, KS, KY, MI, MN, MO, ND, NE, OH, SD, WI;
New England: CT, MA, ME, NH, RI, VT;
Southeast: AL, AR, FL, GA, MS, NC, SC, TN, VA, WV;
Southwest: CO, LA, NM, OK, TX, UT;
West: AZ, AK, CA, HI, ID, MT NV, 0R, WA, WY
MAY 1998
Source: SNL Securities
<PAGE>
EXHIBIT IV-4
Market Area Acquisition Activity
<PAGE>
Table IV-4
Massachusetts Thrift Merger and Acquisition Activity
1997 to Present
<TABLE>
<CAPTION>
Seller Financials at Announcement
----------------------------------------------
Total Total YTD YTD NPAs/ Rsrvs/
Ann'd Comp Assets Equity ROAA ROAE Assets NPLs
Date Date Buyer ST Seller ST ($000) (%) (%) (%) (%) (%)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/10/97 Pending UST Corp MA Somerset Svgs Bk MA 520,339 6.60 1.15 18.72 5.91 31.60
12/15/97 Pending UST Corp MA Affiliated Cmty Bncp MA 1,128,579 9.71 1.10 11.22 0.34 218.71
02/02/98 Pending 1855 Bancorp MA Sandwich Bancorp MA 518,697 7.84 0.98 12.38 0.56 176.50
09/10/96 05/01/97 Berkshire Cnty SB MA Great Barrington SB MA 274,165 13.93 1.49 10.26 0.63 122.04
11/01/96 02/21/97 Bay State FSB MA Union FS&LA MA 38,797 7.45 -0.16 -2.23 0.59 73.01
05/28/97 10/31/97 South Weymouth SB MA Weymouth SB MA 173,557 8.24 0.62 7.73 0.45 190.73
08/30/96 01/03/97 UST Corp MA Walden Bancorp, Inc. MA 1,051,743 8.07 1.14 12.18 0.91 150.25
11/04/96 03/04/97 Citizens Fin'l Group RI Grove Bank MA 598,507 6.49 0.91 14.35 0.58 128.33
12/15/97 01/01/98 Country Bank for Sav MA Leicester Savings Bk MA 31,249 3.65 -3.44 -74.83 5.75 51.12
10/23/97 02/27/98 Eastern Bank Corp MA Emerald Isle Bncp MA 443,503 6.99 0.88 12.59 0.17 416.26
02/26/97 07/22/97 MASSBANK Corp MA Glendale Co-Op Bank MA 36,947 16.23 0.75 4.73 0.00 NA
08/27/96 01/02/97 Grove Bank MA Greater Boston Bk MA 150,167 7.76 0.37 4.72 1.49 259.68
Average 413,854 8.58 0.48 2.65 1.45 165.29
Median 358,834 7.80 0.90 10.74 0.59 150.25
</TABLE>
Table IV-4 (Continued)
<TABLE>
<CAPTION>
Deal Terms and Pricing at Announcement
--------------------------------------------------------------
Deal Deal Deal Deal Pr/ Deal Pr/ Deal Pr/ TgBkPr/
Ann'd Comp Value Pr/Shr Consid. Pr/Bk Tg Bk 4-Qtr Assets CoreDp
Date Date Buyer ST Seller ST ($M) ($) Type (%) (%) EPS (x) (%) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
12/10/97 Pending UST Corp MA Somerset Svgs Bk MA 95.9 5.63 Stock 273.25 273.25 18.16 18.43 15.19
12/15/97 Pending UST Corp MA Affiliated Cmty Bncp MA 277.0 39.92 Stock 231.02 232.23 22.94 24.54 26.57
02/02/98 Pending 1855 Bancorp MA Sandwich Bancorp MA 132.5 64.00 Cash 295.89 306.51 26.12 25.54 24.38
09/10/96 05/01/97 Berkshire Cnty SB MA Great Barrington SB MA NA NA NA NA NA NA NA NA
11/01/96 02/21/97 Bay State FSB MA Union FS&LA MA NA NA NA NA NA NA NA NA
05/28/97 10/31/97 South Weymouth SB MA Weymouth SB MA NA NA NA NA NA NA NA NA
08/30/96 01/03/97 UST Corp MA Walden Bancorp, Inc. MA 165.9 30.88 Stock 168.90 196.16 16.16 15.77 11.38
11/04/96 03/04/97 Citizens Fin'l Group RI Grove Bank MA 91.8 51.00 Cash NA NA NA NA NA
12/15/97 01/01/98 Country Bank for Sav MA Leicester Savings Bk MA NA NA NA NA NA NA NA NA
10/23/97 02/27/98 Eastern Bank Corp MA Emerald Isle Bncp MA 76.7 33.00 Cash 239.48 239.48 21.02 17.29 14.66
02/26/97 07/22/97 MASSBANK Corp MA Glendale Co-Op Bank MA 7.2 28.00 Cash 115.46 115.46 24.56 19.49 4.22
08/27/96 01/02/97 Grove Bank MA Greater Boston Bk MA 18.0 27.56 Mix 138.62 138.62 9.33 10.77 5.17
Average 108.1 35.00 208.95 214.53 19.76 18.83 14.51
Median 93.8 31.94 231.02 232.23 21.02 18.43 14.66
</TABLE>
Source: SNL Securities, LC.
<PAGE>
EXHIBIT IV-5
Summit Bank
Director and Senior Management Summary Resumes
<PAGE>
Summit Bank
Director and Senior Management Summary Resumes
Directors of the Stock Company
Kelly A. Adler has served as a trustee of the Bank since 1995 and a member
of the Bank's Audit Committee since 1996. Ms. Adler continues to serve as a
trustee of the Mutual Company as a director of the Bank, and as Clerk of the
Bank. Ms. Adler is an accountant and has served on several town committees in
Medway, Massachusetts.
Harold W. Bemis has served as a trustee of the Bank since 1967 and as a
member of the Bank's Audit Committee from 1992 to 1994. Mr. Bemis continues to
serve as a trustee of the Mutual Company. He is a retired contractor and
life-long resident of Medway, Massachusetts.
William L. Casey has served as a trustee of the Bank since 1995 and, since
1997, has served as Chairman of the Board of Trustees of the Mutual Company. Mr.
Casey also serves on the Board of Directors of the Bank. He is the Corporate
Manager of Credit and Sales Accounting at Analog Devices, Inc., Norwood,
Massachusetts, an integrated circuit manufacturer. Mr. Casey serves on several
town and community boards in Millis, Massachusetts.
Paul J. DeSimone has served as a trustee of the Bank since 1995 and
currently serves on the Board of Trustees of the Mutual Company. Mr. DeSimone is
owner of DeSimone Surveying Service, a civil engineering firm in Medway,
Massachusetts. Mr. DeSimone has served on the boards of a number of civic and
charitable organizations.
John G. Dugan has served as a trustee of the Bank since 1990 and continues
to serve as a trustee of the Mutual Company. Mr. Dugan also serves on the Audit
Committee of the Mutual Company. He is an attorney in the law firm of Dugan &
Cannon of Medfield, Massachusetts, and serves as town moderator for the town of
Millis. Mr. Dugan participates in a number of civic and charitable
organizations.
Richard Giusti has served as a trustee of the Bank since 1991 and served on
the Bank's Audit Committee from 1994 to 1995. Mr. Giusti continues to serve as a
trustee of the Mutual Company and a director of the Bank. He is Manager of
Administration & Finance of the Metropolitan Machine Co., Inc., a machine
company. Mr. Giusti is involved in various civic activities as well.
John Hasenjaeger has served as a trustee of the Bank since 1995 and
continues to serve as a trustee of the Mutual Company. He is owner of a real
estate firm and also is a professor of management at Boston College School of
Management.
Robert J. Heavey has served as a trustee of the Bank since 1981 and served
as Chairman of the Board of Trustees of the Bank from 1991 to 1994. He continues
to serve as a trustee of the Mutual Company. Mr. Heavey is President and
Treasurer of RJ Heavey Co., Inc., a plumbing company in Walpole, Massachusetts.
He also serves several civic and charitable organizations.
Thomas R. Howie has served as a trustee of the Bank since 1988 and served
on the Bank's Board of Investment from 1990 to 1994 and on its Audit Committee
since 1995. Mr. Howie continues to serve as a trustee of the Mutual Company. He
is Vice President of Howie Oil Company, Inc., a heating oil distributor in
Millis, Massachusetts. He is involved in various charitable and civic
organizations.
Kenneth C.A. Isaacs has served as a trustee of the Bank since 1997. He
continues to serve as a trustee of the Mutual Company and also is a director of
the Bank. Mr. Isaacs is a private trustee with extensive real estate experience.
<PAGE>
Summit Bank
Director and Senior Management Summary Resumes (continued)
Paul V. Kenney has served as a trustee of the Bank since 1992, and
continues to serve as a trustee of the Mutual Company. He is a member of the law
firm Kenney and Maciolek of Medway, Massachusetts. He also serves several civic
organizations.
Eugene R. Liscombe has served as a trustee of the Bank since 1991 and
served on its Board of Investment from 1991 to 1996. Mr. Liscombe also was
Chairman of the Board of Trustees of the Bank from 1994 to 1996. He continues to
serve as a trustee of the Mutual Company and currently serves on the Mutual
Company's Audit Committee. Mr. Liscombe is a self-employed certified public
accountant and is active in several civic and charitable organizations.
Robert A. Matson has served as a trustee of the Bank since 1997 and
continues to serve on the Board of Directors of the Bank. He also is a member of
the Board of Trustees of the Mutual Company. Mr. Matson is self-employed as a
chartered financial consultant and chartered life underwriter. He is involved in
civic and charitable organizations.
James W. Murphy has served as a trustee of the Bank since 1979 and served
as Clerk of the Bank since 1992. Mr. Murphy continues to serve as a trustee of
the Mutual Company. Mr. Murphy is an insurance broker for D.L. Murphy Insurance
of Millis, Massachusetts.
Lawrence E. Novick has served as a trustee of the Bank since 1992, where he
also served on the Board of Investment (since 1996) and on the Audit Committee
(from 1993 to 1996). Mr. Novick continues to serve as a trustee of the Mutual
Company and a director of the Bank. He is a self-employed tax and financial
services advisor in Holliston, Massachusetts. Mr. Novick is involved in many
trade organizations and holds positions in civic and charitable organizations.
Eugene G. Stone has served as a trustee of the Bank since 1988 and
continues to serve as a trustee of the Mutual Company and a director of the
Bank. He has been President and Chief Executive Officer of the Bank since 1988
and Chairman of the Bank since 1997. Mr. Stone serves on the boards of several
civic and charitable organizations.
Executive Officers of the Stock Company Who Are Not Directors
Warren W. Chase, Jr. has served as Vice President and Treasurer of the Bank
since 1995. Prior to joining the Bank, Mr. Chase, a certified public accountant,
worked for 17 years for Sterling Bank, Waltham, Massachusetts as Controller and
Vice President of Financial Planning. His principal areas of responsibility for
the Bank include financial reporting, financial planning and liquidity
management.
Michael A. Dalrymple has been employed by the Bank since 1988, initially as
the Bank's Senior Loan Officer and currently as Vice President of Residential
and Consumer Lending.
John J. Mogan, Jr. is currently Vice President of Commercial Lending and
has served in that capacity for the Bank since 1990.
Pamela J. Mozynski has been employed by the Bank since 1992 and currently
serves as Vice President of Retail Banking. She is responsible for branch
administration, management of the Summit Club (a banking club for customers age
50 and over) and all training for branch personnel. She is also responsible for
Bank security and compliance.
Daniel G. Trombley has been employed by the Bank since 1995 and currently
serves as Vice President responsible for all deposit and loan servicing
operations, systems and data processing operations. Prior to 1995, Mr. Trombley
was a Senior Vice President of Quincy Savings Bank, Quincy, Massachusetts.
Source: Summit Bank's prospectus.
<PAGE>
EXHIBIT IV-6
Summit Bank
Pro Forma Regulatory Capital Ratios
<PAGE>
EXHIBIT IV-6
Summit Bank
Pro Forma Regulatory Capital Ratios
<TABLE>
<CAPTION>
Pro Forma at March 31, 1998, Based upon the Sale of
---------------------------------------------------------------------------------
1,190,250
765,000 900,000 1,035,000 Shares(1)
Shares Shares Shares at Adjusted
Historical at at Minimum of at Midpoint of at Maximum of Maximum of
March 31, 1998 Offering Range Offering Range Offering Range Offering Range
------------------ ------------------ ------------------ ------------------ ------------------
Percent Percent Percent Percent Percent
of of of of of
Amount Assets(2) Amount Assets(2) Amount Assets(2) Amount Assets(2) Amount Assets(2)
------ --------- ------ --------- ------ --------- ------ --------- ------ ---------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital............. $ 9,890 7.54% $12,559 9.34% $13,060 9.67% $13,573 10.00% $14,163 10.38%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Leverage capital:
Capital level (3)...... $ 9,454 7.78% $12,123 9.72% $12,624 10.07% $13,137 10.43% $13,727 10.83%
Requirement (4)........ 4,859 4.00% 4,990 4.00% 5,015 4.00% 5,039 4.00% 5,068 4.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess............... $ 4,595 3.78% $ 7,133 5.72% $ 7,609 6.07% $ 8,098 6.43% $ 8,659 6.83%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Risk-based capital:
Capital level (3)(5)... $10,014 14.39% $12,683 17.81% $13,184 18.43% $13,697 19.07% $14,287 19.79%
Requirement............ 5,567 8.00 5,698 8.00% 5,722 8.00% 5,747 8.00% 5,776 8.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess............... $ 4,447 6.39% $ 6,985 9.81% $ 7,462 10.43% $ 7,950 11.07% $ 8,511 11.79%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
</TABLE>
- ----------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Offering Range of up to 15% as a
result of regulatory considerations or changes in market conditions or
general financial and economic conditions following the commencement of the
Offering.
(2) GAAP capital levels are shown as a percentage of total assets. Leverage
capital levels are shown as a percentage of tangible assets. Risk-based
capital levels are shown as a percentage of risk-weighted assets.
(3) Pro forma capital levels assume that the Bank funds the Recognition Plan to
enable the Recognition Plan to purchase a number of shares equal to 4% of
the common stock sold in the Offering, and that the ESOP purchases 8% of
the shares sold in the Offering. See "Management of the Bank" for a
discussion of the Recognition Plan and ESOP.
(4) The current leverage capital requirement for banks is 3% of total adjusted
assets for banks that receive the highest supervisory rating for safety and
soundness and that are not experiencing or anticipating significant growth.
The current leverage capital ratio applicable to all other banks is 4% to
5%. Management of the Bank believes that the applicable leverage capital
requirement for the Bank is 3% of total adjustable assets. See
"Regulation--Regulatory Capital Requirements.
(5) Assumes net proceeds are invested in assets that carry a 50%
risk-weighting.
Source: Summit Bank's prospectus.
<PAGE>
EXHIBIT IV-7
Summit Bank
Pro Forma Analysis Sheet: Fully Converted Basis
<PAGE>
EXHIBIT IV-7
PRO FORMA ANALYSIS SHEET
Summit Bank
Prices as of May 29, 1998
<TABLE>
<CAPTION>
All Public
Peer Group Massachusetts Companies Institutions
---------------- ----------------------- ------------
Price Multiple Symbol Subject(1) Mean Median Mean Median Mean
- -------------- ------ ---------- ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio = P/E 12.61x 22.87x 22.30x 18.38x 16.73x 19.80x
Price-book ratio = P/B 74.38% 105.61% 105.01% 191.57% 186.03% 167.54%
Price-assets ratio = P/A 13.49% 25.14% 24.46% 17.97% 17.13% 20.81%
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
- --------------------
<S> <C> <C> <C>
Pre-Conversion Earnings (Y) $1,228,000 ESOP Stock Purchases (E) 8.00%(5)
Pre-Conversion Book Value (B) $9,890,000 Cost of ESOP Borrowings (S) 0.00%(4)
Pre-Conv. Tang. Book Value (B) $9,890,000 ESOP Amortization (T) 10.00 years
Pre-Conversion Assets (A) $131,204,000 RRP Amount (M) 4.00%
Reinvestment Rate (2)(R) 3.23% RRP Vesting (N) 5.00 years(5)
Est. Conversion Expenses (3)(X) 3.00% Foundation (F) 0.00%
Tax rate (TAX) 40.00% Tax Benefit (Z) 0
Percentage Sold (PCT) 100.00%
</TABLE>
Calculation of Pro Forma Value After Conversion
- -----------------------------------------------
1. V= P/E * (Y) V= $20,000,000
-----------------------------------------------------------
1 - P/E * PCT * ((1-X-E-M-F)*R - (1-TAX)*E/T - (1-TAX)*M/N)
2. V= P/B * (B+Z) V= $20,000,000
---------------------------
1 - P/B * PCT * (1-X-E-M-F)
3. V= P/A * (A+Z) V= $20,000,000
---------------------------
1 - P/A * PCT * (1-X-E-M-F)
<TABLE>
<CAPTION>
Aggregate
Shares Sold Price Per Gross Offering Total Shares Market Value
Conclusion to Public Share Proceeds Issued of Stock Issued
- ---------- ----------- --------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Minimum 1,700,000 10.00 $17,000,000 1,700,000 17,000,000
Midpoint 2,000,000 10.00 20,000,000 2,000,000 20,000,000
Maximum 2,300,000 10.00 23,000,000 2,300,000 23,000,000
Supermaximum 2,645,000 10.00 26,450,000 2,645,000 26,450,000
</TABLE>
- ----------
(1) Pricing ratios shown reflect the midpoint value.
(2) Net return reflects a reinvestment rate of 5.39 percent, and a tax rate of
40.00 percent.
(3) Offering expenses shown at estimated midpoint value.
(4) No cost is applicable since holding company will fund the ESOP loan.
(5) ESOP and MRP amortize over 10 years and 5 years, respectively; amortization
expenses tax effected at 40.00 percent.
<PAGE>
EXHIBIT IV-8
Summit Bank
Pro Forma Effect of Conversion Proceeds: Fully Converted Basis
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Summit Bank
At the Minimum
1. Offering Proceeds ..................................... $17,000,000
Less: Estimated Offering Expenses ..................... 510,000
-----------
Net Conversion Proceeds ............................... $16,490,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................... $16,490,000
Less: Capital Expenditures ............................ 0
Less: Non-Cash Stock Purchases(1) ..................... 2,040,000
-----------
Net Proceeds Reinvested ............................... $14,450,000
Estimated net incremental rate of return .............. 3.23%
-----------
Earnings Increase ..................................... $ 467,313
Less: Estimated cost of ESOP borrowings(2) .......... 0
Less: Amortization of ESOP borrowings(3) ............ 81,600
Less: Recognition Plan Vesting(4) ................... 81,600
-----------
Net Earnings Increase ................................. $ 304,113
<TABLE>
<CAPTION>
Before Net Earnings After
3. Pro-Forma Earnings Conversion Increase Conversion
---------- ------------ ----------
<S> <C> <C> <C>
12 Months ended March 31, 1998 (reported) ......... $1,228,000 $304,113 $1,532,113
12 Months ended March 31, 1998 (core) ............. $ 722,000 $304,113 $1,026,113
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
4. Pro-Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $9,890,000 $14,450,000 $0 $24,340,000
March 31, 1998 (Tangible) ...... $9,890,000 $14,450,000 $0 $24,340,000
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
5. Pro-Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $131,204,000 $14,450,000 $0 $145,654,000
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 10 years, amortization expense is
tax-effected at a 40.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
40.00 percent.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Summit Bank
At the Midpoint
1. Offering Proceeds ..................................... $20,000,000
Less: Estimated Offering Expenses ..................... 600,000
-----------
Net Conversion Proceeds ............................... $19,400,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................... $19,400,000
Less: Capital Expenditures ............................ 0
Less: Non-Cash Stock Purchases(1) ..................... 2,400,000
-----------
Net Proceeds Reinvested ............................... $17,000,000
Estimated net incremental rate of return .............. 3.23%
-----------
Earnings Increase ..................................... $ 549,780
Less: Estimated cost of ESOP borrowings(2) .......... 0
Less: Amortization of ESOP borrowings(3) ............ 96,000
Less: Recognition Plan Vesting(4) ................... 96,000
-----------
Net Earnings Increase ................................. $ 357,780
<TABLE>
<CAPTION>
Before Net Earnings After
3. Pro-Forma Earnings Conversion Increase Conversion
---------- ------------ ----------
<S> <C> <C> <C>
12 Months ended March 31, 1998 (reported) ......... $1,228,000 $357,780 $1,585,780
12 Months ended March 31, 1998 (core) ............. $ 722,000 $357,780 $1,079,780
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
4. Pro-Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $9,890,000 $17,000,000 $0 $26,890,000
March 31, 1998 (Tangible) ...... $9,890,000 $17,000,000 $0 $26,890,000
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
5. Pro-Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $131,204,000 $17,000,000 $0 $148,204,000
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 10 years, amortization expense is
tax-effected at a 40.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
40.00 percent.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Summit Bank
At the Maximum
1. Offering Proceeds ..................................... $23,000,000
Less: Estimated Offering Expenses ..................... 690,000
-----------
Net Conversion Proceeds ............................... $22,310,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................... $22,310,000
Less: Capital Expenditures ............................ 0
Less: Non-Cash Stock Purchases(1) ..................... 2,760,000
-----------
Net Proceeds Reinvested ............................... $19,550,000
Estimated net incremental rate of return .............. 3.23%
-----------
Earnings Increase ..................................... $ 632,247
Less: Estimated cost of ESOP borrowings(2) .......... 0
Less: Amortization of ESOP borrowings(3) ............ 110,400
Less: Recognition Plan Vesting(4) ................... 110,400
-----------
Net Earnings Increase ................................. $ 411,447
<TABLE>
<CAPTION>
Before Net Earnings After
3. Pro-Forma Earnings Conversion Increase Conversion
---------- ------------ ----------
<S> <C> <C> <C>
12 Months ended March 31, 1998 (reported) ......... $1,228,000 $411,447 $1,639,447
12 Months ended March 31, 1998 (core) ............. $ 722,000 $411,447 $1,133,447
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
4. Pro-Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $9,890,000 $19,550,000 $0 $29,440,000
March 31, 1998 (Tangible) ...... $9,890,000 $19,550,000 $0 $29,440,000
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
5. Pro-Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $131,204,000 $19,550,000 $0 $150,754,000
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 10 years, amortization expense is
tax-effected at a 40.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
40.00 percent.
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Summit Bank
At the Supermaximum Value
1. Offering Proceeds ..................................... $26,450,000
Less: Estimated Offering Expenses ..................... 793,500
-----------
Net Conversion Proceeds ............................... $25,656,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................... $25,656,500
Less: Capital Expenditures ............................ 0
Less: Non-Cash Stock Purchases(1) ..................... 3,174,000
-----------
Net Proceeds Reinvested ............................... $22,482,500
Estimated net incremental rate of return .............. 3.23%
-----------
Earnings Increase ..................................... $ 727,084
Less: Estimated cost of ESOP borrowings(2) .......... 0
Less: Amortization of ESOP borrowings(3) ............ 126,960
Less: Recognition Plan Vesting(4) ................... 126,960
-----------
Net Earnings Increase ................................. $ 473,164
<TABLE>
<CAPTION>
Before Net Earnings After
3. Pro-Forma Earnings Conversion Increase Conversion
---------- ------------ ----------
<S> <C> <C> <C>
12 Months ended March 31, 1998 (reported) ......... $1,228,000 $473,164 $1,701,164
12 Months ended March 31, 1998 (core) ............. $ 722,000 $473,164 $1,195,164
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
4. Pro-Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $9,890,000 $22,482,500 $0 $32,372,500
March 31, 1998 (Tangible) ...... $9,890,000 $22,482,500 $0 $32,372,500
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
5. Pro-Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $131,204,000 $22,482,500 $0 $153,686,500
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 10 years, amortization expense is
tax-effected at a 40.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
40.00 percent.
<PAGE>
EXHIBIT IV-9
Peer Group Core Earnings Analysis
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended March 31, 1998
<TABLE>
<CAPTION>
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income Estimated
to Common Gains (Loss) @ 34% Items to Common Shares Core EPS
---------- ------------ ---------- ---------- ----------- ------ ---------
($000) ($000) ($000) ($000) ($000) ($000) ($)
Comparable Group
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALLB Alliance Bank MHC of PA (19.9) 2,014 0 0 0 2,014 3,273 0.62
BRKL Brookline Bncp MHC of MA(47.0)(P) -- -- -- -- -- 29,095 0.39
CMSV Commty. Svgs, MHC of FL (48.5) 5,237 -612 208 0 4,833 5,100 0.95
FFFL Fidelity Bcsh MHC of FL (47.7) 7,277 -1,566 532 0 6,243 6,802 0.92
SKBO First Carnegie MHC of PA(45.0)(1) 937 184 -63 0 1,058 2,300 0.46
FFSX First FSB MHC Sxld of IA(46.1) 3,282 44 -15 0 3,311 2,838 1.17
GBNK Gaston Fed Bncp MHC of NC(47.0(P) -- -- -- -- -- 4,497 0.43
HARS Harris Fin. MHC of PA (24.3) 18,811 -5,261 1,789 0 15,339 33,942 0.45
JXSB Jcksnville SB,MHC of IL (45.6) 969 -511 174 0 632 1,908 0.33
LFED Leeds Fed Bksr MHC of MD (36.3) 3,432 0 0 0 3,432 5,182 0.66
NBCP Niagara Bancorp of NY MHC(45.4)(P) -- -- -- -- -- 29,756 0.58
NWSB Northwest Bcrp MHC of PA (30.7) 20,533 -37 13 0 20,509 46,838 0.44
PBHC Pathfinder BC MHC of NY (46.1) 1,751 -497 169 0 1,423 2,831 0.50
PBCT Peoples Bank, MHC of CT (40.1) 95,800 -67,500 22,950 0 51,250 64,083 0.80
PHSB Ppls Home SB, MHC of PA (45.0) 1,725 -262 89 0 1,552 2,760 0.56
PLSK Pulaski SB, MHC of NJ (46.0) 1,161 0 0 0 1,161 2,108 0.55
SBFL SB Fngr Lakes MHC of NY (33.1) 933 -218 74 0 789 3,570 0.22
WAYN Wayne Svgs Bks MHC of OH (47.8)(1) 1,889 -207 70 0 1,752 2,484 0.71
WCFB Wbstr Cty FSB MHC of IA (45.2)(1) 1,364 0 0 0 1,364 2,112 0.65
</TABLE>
(P) Pro forma financial data reflective of new conversion.
(1) Financial information is for the quarter ending December 31, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT IV-10
Summit Bank
Pro Forma Analysis Sheet: Minority Stock Offering
<PAGE>
EXHIBIT IV-10
PRO FORMA ANALYSIS SHEET
Summit Bank
Prices as of May 29, 1998
<TABLE>
<CAPTION>
All Public
Peer Group Massachusetts Companies Institutions
---------------- ----------------------- ------------
Price Multiple Symbol Subject(1) Mean Median Mean Median Mean
- -------------- ------ ---------- ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio = P/E 14.48x 27.02x 27.38x 18.38x 16.73x 19.80x
Price-book ratio = P/B 115.54% 224.96% 231.05% 191.57% 186.03% 167.54%
Price-assets ratio = P/A 14.43% 29.37% 28.47% 17.97% 17.13% 20.81%
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
- --------------------
<S> <C> <C> <C>
Pre-Conversion Earnings (Y) $1,228,000 ESOP Stock Purchases (E) 8.00%(5)
Pre-Conversion Book Value (B) $9,890,000 Cost of ESOP Borrowings (S) 0.00%(4)
Pre-Conv. Tang. Book Value (B) $9,890,000 ESOP Amortization (T) 10.00 years
Pre-Conversion Assets (A) $131,204,000 RRP Amount (M) 4.00%
Reinvestment Rate (2)(R) 3.23% RRP Vesting (N) 5.00 years(5)
Est. Conversion Expenses (3)(X) 5.56% Foundation (F) 0.00%
Tax rate (TAX) 40.00% Tax Benefit (Z) 0
Percentage Sold (PCT) 45.00%
</TABLE>
Calculation of Pro Forma Value After Conversion
- -----------------------------------------------
1. V= P/E * (Y) V= $20,000,000
-----------------------------------------------------------
1 - P/E * PCT * ((1-X-E-M-F)*R - (1-TAX)*E/T - (1-TAX)*M/N)
2. V= P/B * (B+Z) V= $20,000,000
---------------------------
1 - P/B * PCT * (1-X-E-M-F)
3. V= P/A * (A+Z) V= $20,000,000
---------------------------
1 - P/A * PCT * (1-X-E-M-F)
<TABLE>
<CAPTION>
Aggregate
Shares Issued Shares Sold Price Per Gross Offering Total Shares Market Value
Conclusion to MHC to Public Share Proceeds Issued of Stock Issued
- ---------- ------------- ----------- --------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Minimum 935,000 765,000 10.00 $ 7,650,000 765,000 7,650,000
Midpoint 1,100,000 900,000 10.00 9,000,000 900,000 9,000,000
Maximum 1,265,000 1,035,000 10.00 10,350,000 1,035,000 10,350,000
Supermaximum 1,454,750 1,190,250 10.00 11,902,500 1,190,250 11,902,500
</TABLE>
- ----------
(1) Pricing ratios shown reflect the midpoint value.
(2) Net return reflects a reinvestment rate of 5.39 percent, and a tax rate of
40.00 percent.
(3) Offering expenses shown at estimated midpoint value.
(4) No cost is applicable since holding company will fund the ESOP loan.
(5) ESOP and MRP amortize over 10 years and 5 years, respectively; amortization
expenses tax effected at 40.00 percent.
<PAGE>
EXHIBIT IV-11
Summit Bank
Pro Forma Effects: Minority Stock Offering
<PAGE>
Exhibit IV-11
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Summit Bank
At the Minimum
1. Offering Proceeds ..................................... $7,650,000
Less: Estimated Offering Expenses ..................... 476,000
----------
Net Conversion Proceeds ............................... $7,174,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................... $7,174,000
Less: Capital Expenditures ............................ 0
Less: Non-Cash Stock Purchases(1) ..................... 918,000
----------
Net Proceeds Reinvested ............................... $6,256,000
Estimated net incremental rate of return .............. 3.23%
----------
Earnings Increase ..................................... $ 202,319
Less: Estimated cost of ESOP borrowings(2) .......... 0
Less: Amortization of ESOP borrowings(3) ............ 36,720
Less: Recognition Plan Vesting(4) ................... 36,720
----------
Net Earnings Increase ................................. $ 128,879
<TABLE>
<CAPTION>
Before Net Earnings After
3. Pro-Forma Earnings Conversion Increase Conversion
---------- ------------ ----------
<S> <C> <C> <C>
12 Months ended March 31, 1998 (reported) ......... $1,228,000 $128,879 $1,356,879
12 Months ended March 31, 1998 (core) ............. $ 722,000 $128,879 $ 850,879
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
4. Pro-Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $9,890,000 $6,256,000 $0 $16,146,000
March 31, 1998 (Tangible) ...... $9,890,000 $6,256,000 $0 $16,146,000
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
5. Pro-Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $131,204,000 $6,256,000 $0 $137,460,000
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 10 years, amortization expense is
tax-effected at a 40.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
40.00 percent.
<PAGE>
Exhibit IV-11
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Summit Bank
At the Midpoint
1. Offering Proceeds ..................................... $9,000,000
Less: Estimated Offering Expenses ..................... 500,000
----------
Net Conversion Proceeds ............................... $8,500,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................... $8,500,000
Less: Capital Expenditures ............................ 0
Less: Non-Cash Stock Purchases(1) ..................... 1,080,000
----------
Net Proceeds Reinvested ............................... $7,420,000
Estimated net incremental rate of return .............. 3.23%
----------
Earnings Increase ..................................... $ 239,963
Less: Estimated cost of ESOP borrowings(2) .......... 0
Less: Amortization of ESOP borrowings(3) ............ 43,200
Less: Recognition Plan Vesting(4) ................... 43,200
----------
Net Earnings Increase ................................. $ 153,563
<TABLE>
<CAPTION>
Before Net Earnings After
3. Pro-Forma Earnings Conversion Increase Conversion
---------- ------------ ----------
<S> <C> <C> <C>
12 Months ended March 31, 1998 (reported) ......... $1,228,000 $153,563 $1,381,563
12 Months ended March 31, 1998 (core) ............. $ 722,000 $153,563 $ 875,563
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
4. Pro-Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $9,890,000 $7,420,000 $0 $17,310,000
March 31, 1998 (Tangible) ...... $9,890,000 $7,420,000 $0 $17,310,000
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
5. Pro-Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $131,204,000 $7,420,000 $0 $138,624,000
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 10 years, amortization expense is
tax-effected at a 40.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
40.00 percent.
<PAGE>
Exhibit IV-11
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Summit Bank
At the Maximum
1. Offering Proceeds ..................................... $10,350,000
Less: Estimated Offering Expenses ..................... 500,000
-----------
Net Conversion Proceeds ............................... $ 9,850,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................... $ 9,850,000
Less: Capital Expenditures ............................ 0
Less: Non-Cash Stock Purchases(1) ..................... 1,242,000
-----------
Net Proceeds Reinvested ............................... $ 8,608,000
Estimated net incremental rate of return .............. 3.23%
-----------
Earnings Increase ..................................... $ 278,383
Less: Estimated cost of ESOP borrowings(2) .......... 0
Less: Amortization of ESOP borrowings(3) ............ 49,680
Less: Recognition Plan Vesting(4) ................... 49,680
-----------
Net Earnings Increase ................................. $ 179,023
<TABLE>
<CAPTION>
Before Net Earnings After
3. Pro-Forma Earnings Conversion Increase Conversion
---------- ------------ ----------
<S> <C> <C> <C>
12 Months ended March 31, 1998 (reported) ......... $1,228,000 $179,023 $1,407,023
12 Months ended March 31, 1998 (core) ............. $ 722,000 $179,023 $ 901,023
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
4. Pro-Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $9,890,000 $8,608,000 $0 $18,498,000
March 31, 1998 (Tangible) ...... $9,890,000 $8,608,000 $0 $18,498,000
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
5. Pro-Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $131,204,000 $8,608,000 $0 $139,812,000
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 10 years, amortization expense is
tax-effected at a 40.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
40.00 percent.
<PAGE>
Exhibit IV-11
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Summit Bank
At the Supermaximum Value
1. Offering Proceeds ..................................... $11,902,500
Less: Estimated Offering Expenses ..................... 500,000
-----------
Net Conversion Proceeds ............................... $11,402,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds ............................... $11,402,500
Less: Capital Expenditures ............................ 0
Less: Non-Cash Stock Purchases(1) ..................... 1,428,300
-----------
Net Proceeds Reinvested ............................... $ 9,974,200
Estimated net incremental rate of return .............. 3.23%
-----------
Earnings Increase ..................................... $ 322,566
Less: Estimated cost of ESOP borrowings(2) .......... 0
Less: Amortization of ESOP borrowings(3) ............ 57,132
Less: Recognition Plan Vesting(4) ................... 57,132
-----------
Net Earnings Increase ................................. $ 208,302
<TABLE>
<CAPTION>
Before Net Earnings After
3. Pro-Forma Earnings Conversion Increase Conversion
---------- ------------ ----------
<S> <C> <C> <C>
12 Months ended March 31, 1998 (reported) ......... $1,228,000 $208,302 $1,436,302
12 Months ended March 31, 1998 (core) ............. $ 722,000 $208,302 $ 930,302
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
4. Pro-Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $9,890,000 $9,974,200 $0 $19,864,200
March 31, 1998 (Tangible) ...... $9,890,000 $9,974,200 $0 $19,864,200
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit After
5. Pro-Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
March 31, 1998 ................. $131,204,000 $9,974,200 $0 $141,178,200
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 and 4.0 percent of the
offering, respectively.
(2) ESOP stock purchases are internally financed by a loan from the holding
company.
(3) ESOP borrowings are amortized over 10 years, amortization expense is
tax-effected at a 40.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
40.00 percent.
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------
Financial Services Industry Consultants FIRM QUALIFICATION STATEMENT
RP Financial provides financial and management consulting and valuation services
to the financial services industry nationwide, particularly federally-insured
financial institutions. RP Financial establishes long-term client relationships
through its wide array of services, emphasis on quality and timeliness, hands-on
involvement by our principals and senior consulting staff, and careful
structuring of strategic plans and transactions. RP Financial's staff draws from
backgrounds in consulting, regulatory agencies and investment banking, thereby
providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Through a program known as
SAFE (Strategic Alternatives Financial Evaluations), RP Financial analyzes
strategic options to enhance shareholder value or other established objectives.
Our planning services involve conducting situation analyses; establishing
mission statements, strategic goals and objectives; and identifying strategies
for enhancement of franchise value, capital management and planning, earnings
improvement and operational issues. Strategy development typically includes the
following areas: capital formation and management, asset/liability targets,
profitability, return on equity and market value of stock. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies and assessing the feasibility/compatibility of
such strategies with regulations and/or other guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, comprehensive in-house data bases, valuation expertise and
regulatory knowledge, RP Financial's M&A consulting focuses on structuring
transactions to enhance shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary companies, mark-to-market transactions, loan and servicing
portfolios, non-traded securities, core deposits, FAS 107 (fair market value
disclosure), FAS 122 (loan servicing rights) and FAS 123 (stock options). Our
principals and staff are highly experienced in performing valuation appraisals
which conform with regulatory guidelines and appraisal industry standards. RP
Financial is the nation's leading valuation firm for mutual-to-stock conversions
of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial'sconsulting services are aided by
its in-house data base resources for commercial banks and savings institutions
and proprietary valuation and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers Year 2000 advisory and conversion
services to financial institutions which are more cost effective and less
disruptive than most other providers of such service.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (18)
William E. Pommerening, Managing Director (14)
Gregory E. Dunn, Senior Vice President (16)
James P. Hennessey, Senior Vice President (13)
James J. Oren, Senior Vice President (11)
- --------------------------------------------------------------------------------
Washington Headquarters
Rosslyn Center
1700 North Monroe Street, Suite 2210 Telephone: (703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
Exhibit 99.4
Service Bancorp, Inc.
Holding Company for
Summit Bank
Medway, Massachusetts
Proposed Marketing Materials
<PAGE>
Marketing Materials for
Service Bancorp, Inc.
Medway, Massachusetts
Table of Contents
I. Press Release
A. Explanation
B. Schedule
C. Distribution List
D. Press Release Examples
II. Advertisements
A. Explanation
B. Schedule
C. Advertisement Examples
III. Question and Answer Brochure
A. Explanation
B. Quantity and Method of Distribution
C. Example
IV. Officer and Director Support Brochure
A. Explanation
B. Method of Distribution
C. Example
V. IRA Mailing
A. Explanation
B. Quantity and Method of Distribution
C. IRA Mailing Example
VI. Counter Cards and Lobby Posters
A. Explanation
B. Quantity
VII. Invitations
A. Explanation
B. Quantity - Method of Distribution
C. Examples
<PAGE>
I. Press Releases
A. Explanation
In an effort to assure that all customers, community members and other
interested investors receive prompt accurate information in a
simultaneous manner, the Bank will forward press releases to area
newspapers, radio stations, etc. at various points during the
Conversion and Reorganization process.
Only press releases approved by Issuer's Counsel and the Massachusetts
Division of Banks will be forwarded for publication in any manner.
B. Schedule
1. Approval of Conversion and Reorganization
2. Close of Stock Offering
<PAGE>
National and Local Distribution List
The Bank should provide a supplemental distribution list that includes all local
newspapers that it considers to be within its market area.
(TO BE PROVIDED)
<PAGE>
Press Release FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Eugene G. Stone
President and Chief Executive Officer
Summit Bank
(508) 533-4343
SUMMIT BANK
REORGANIZATION FROM MUTUAL HOLDING COMPANY TO STOCK
HOLDING COMPANY APPROVED
Eugene G. Stone, President and Chief Executive Officer of Summit Bank
(the "Bank"), Medway, Massachusetts-, announced today that Summit Bank and its
parent company, Service Bancorp, MHC, have received approval from the
Massachusetts Division of Banks to reorganize into a "two-tier" mutual holding
company. Summit Bank will then become a subsidiary of a recently organized
holding company, Service Bancorp, Inc.
Pursuant to the stock issuance plan, Service Bancorp is offering up to
1,190,250 shares of its common stock, at a price of $10.00 per share. The stock
will be offered on a priority basis to depositors of the bank as of March 31,
1997, depositors of the bank as of June 30, 1998, Summit Bancorp's Employee
Stock Ownership Plan and the Bank's employees, officers and directors. If any
shares remain, stock will then be offered to persons who reside in Medway,
Franklin, Medfield and Millis, Massachusetts. The Subscription and Community
Offering (together, the "Offering") will be managed by Trident Securities, Inc.
of Raleigh, North Carolina. Prospectuses describing, among other things, the
terms of the Offering will be mailed to eligible depositors of the Bank on or
about August ___, 1998.
According to Mr. Stone, "Our day to day operations will not change as a
result of the
<PAGE>
reorganization and deposits will continue to be insured by the FDIC up to the
applicable legal limits."
Customers or members of the community with questions concerning the
reorganization should call the Stock Information Center at (508)
________________, or visit the Bank's main office at 81 Main Street in Medway.
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of Service Bancorp, Inc. The offer is made only by the Prospectus. The shares of
Common Stock are not deposits or savings accounts and will not be insured by the
Federal Deposit Insurance Corporation or any other government agency.
<PAGE>
Press Release FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Eugene G. Stone
President and Chief Executive Officer
Summit Bank
(508) 533-4343
SERVICE BANCORP, INC. COMPLETES REORGANIZATION AND STOCK SALE
Medway, Massachusetts - (_______, 1998) Eugene G. Stone, President and
Chief Executive Officer of Summit Bank (the "Bank"), announced today that
Service Bancorp, Inc. (the "Company"), the holding company for the Bank, will
complete its stock offering on _________, 1998. In connection with the Bank's
Conversion and Reorganization. __________ shares were sold at $10.00 per share
in connection with the stock offering.
Mr. Stone indicated that the board of directors of the Bank want to
express their thanks for the response to the stock offering and that the Bank
looks forward to continuing to serve the needs of its customers and the
community as a stock institution. The offering was managed by Trident
Securities, Inc. The stock is expected to commence trading on the Nasdaq
Smallcap Market under the symbol "______" on ___________, 1998.
<PAGE>
II. Advertisements (Optional)
A. Explanation
The intended use of the attached advertisement "A" is to notify the
Bank's customers and members of the local community that the Conversion
and Reorganization offering is underway.
The intended use of advertisement "B" is to remind the Bank's customers
and members of the local community of the closing date of the stock
offering.
B. Media Schedule
1. Advertisement A - To be run immediately following regulatory
approval and run as often as weekly thereafter.
2. Advertisement B - To be run during the last week of the
subscription offering.
The Bank may, depending upon the response from customers and the
community, choose to run fewer ads or no ads at all.
<PAGE>
Advertisement (A)
This announcement is neither an offer to sell nor a solicitation of an offer
to buy these securities. The offer is made only by the Prospectus. These
shares have not been approved or disapproved by the Federal Deposit
Insurance Corporation, the Massachusetts Division of Banks, nor
has the commission or division passed upon the accuracy or
adequacy of the prospectus. Any representation to the
contrary is unlawful.
New Issue _______, 1998
________ Shares
These shares are being offered pursuant
to a Plan of Conversion and Reorganization whereby
Summit Bank
Medway, Massachusetts will
reorganize into a two-tier mutual holding company and
become a wholly-owned subsidiary of
Service Bancorp, Inc.
Common Stock
---------------
Price $10.00 Per Share
---------------
Trident Securities, Inc.
For a copy of the prospectus call (508) ________.
Copies of the Prospectus may be obtained in any State in which
this announcement is circulated from the undersigned or
such other brokers and dealers as may legally offer
these securities in such state.
<PAGE>
Advertisement (B)
ATTENTION: SUMMIT BANK'S ELIGIBLE
DEPOSITORS
_____________, IS THE DEADLINE TO
ORDER STOCK OF SERVICE BANCORP, INC.
Eligible depositors of Summit Bank
have the opportunity
to invest in Summit Bank by subscribing
for common stock in its holding company
SERVICE BANCORP, INC.
A Prospectus relating to these securities is
available at our office or by calling our
Stock Information Center at (508) _____________.
This announcement is not an offer to sell or a
solicitation of an offer to buy the stock of Service Bancorp, Inc. The offer
is made only by the Prospectus. The shares of Common Stock are not
deposits or savings accounts and will not be insured
by the Federal Deposit Insurance Corporation
or any other government agency.
<PAGE>
III. Question and Answer Brochure
A. Explanation
The Question and Answer brochure is an essential marketing piece in any
Conversion and Reorganization. It serves to answer some of the most
commonly asked questions in "plain, everyday language". Although most
of the answers are taken verbatim from the Prospectus, it saves a
prospective investor from searching for the answer to a simple
question.
B. Method of Distribution
There are four primary methods of distribution of the Question and
Answer brochure. However, regardless of the method the brochures are
always accompanied by a Prospectus.
1. A Question and Answer brochure is sent out in the initial mailing
to all eligible account holders of the Bank.
2. Question and Answer brochures are available at the Bank.
3. Question and Answer brochures are distributed in information
packets at community meetings.
4. Question and Answer brochures are sent out in a standard
information packet to all interested investors who phone the
Stock Information Center requesting information.
<PAGE>
Summit Bank
Medway, Massachusetts
Questions and Answers Regarding the Subscription and Community Offering
This information is neither an offer to sell nor a solicitation of an offer to
buy securities. The offer is made only by the Prospectus. A Prospectus can be
obtained at any Summit Bank office or by calling the Summit Bank Stock
Information Center at (508) [________]. There shall be no sale of stock in any
state in which any offer, solicitation of an offer or sale of stock would be
unlawful.
MUTUAL TO STOCK CONVERSION AND REORGANIZATION
The Bank's Board of Directors and the Mutual Holding Company's Board of Trustees
have voted to convert to a two-tier mutual holding company and the Mutual
Company's Corporators have approved it. Complete details on the Conversion and
Reorganization, including reasons for conversion and reorganization, are
contained in the Prospectus. We ask you to please read it carefully.
This brochure is provided to answer basic questions you might have about the
Conversion and Reorganization. Remember, the Conversion and Reorganization will
not affect the rate on any of your savings accounts or loans.
THE OFFERING AND REORGANIZATION
1. Q. What is the purpose of the Stock Offering?
A. We are selling shares of common stock so that we can raise capital to grow
and compete more effectively in our market area, and so that our
depositors, employees, management and directors may obtain an equity
ownership in the Bank. As part of the reorganization, you will have the
opportunity to become a stockholder of the Stock Company, which will allow
you to share indirectly in the future earnings and growth of our Bank. The
capital raised in the stock offering will enable us to expand our lending
and investment activities, and may be used to establish or acquire new
branch offices or acquire other financial institutions.
2. Q. Will the transaction be beneficial to the communities that the Bank
serves?
A. Management believes that the Offering is in the best interest of the
various communities that Summit Bank serves because following the stock
offering it is anticipated that a significant portion of the Common Stock
will be owned by local residents desiring to share in the ownership of a
local community financial institution. Management desires that a
significant portion of the shares of common stock sold in the Offering
will be sold to residents of the Savings Bank's "Local Community."
<PAGE>
3. Q. Will the transaction have any effect on savings accounts, certificates of
deposit or loans with Summit Bank?
A. No. The transaction will not change the amount, interest rate or
withdrawal rights of savings and checking accounts or certificates of
deposit. The rights and obligations of borrowers under their loan
agreements will not be affected.
4. Q. Will the Offering cause any changes in personnel or management?
A. No. The Offering will not cause any changes in personnel or management.
The normal day-to-day operations will continue as before.
THE SUBSCRIPTION AND COMMUNITY OFFERINGS
5. Q. What are the Subscription and Community Offerings?
A. Under the Stock Issuance Plan adopted by Summit Bank, consistent with the
board's objective for Summit Bank to remain a locally owned financial
institution, the Holding Company is offering shares of stock to certain
current and former customers of the Bank and to the Company's Employee
Stock Ownership Plan ("ESOP") in the Subscription Offering. Shares which
are not subscribed for in the Subscription Offering, if any, may be
offered to the general public in a Community Offering with preference
given to natural persons who are residents of Medway, Franklin, Medfield
and Millis, Massachusetts. The Subscription Offering and Community
Offering, if conducted, are being managed by Trident Securities, Inc. It
is anticipated that any shares not subscribed for in either the
Subscription or Community Offerings may be offered for sale in a
Syndicated Community Offering, which is an offering on a best efforts
basis by a selling group of broker-dealers.
6. Q. Who is entitled to buy Service Bancorp, Inc. common stock?
A. The shares are being offered pursuant to the Plan of Conversion on a
priority basis to: (i) persons who had one or more deposit accounts with
us with the aggregate balances of at least $50 on March 31, 1997; (ii)
persons who had one or more deposit accounts with us with the aggregate
balances of at least $50 on June 30, 1998; (iii) Service Bancorp's
Employee Stock Ownership Plan (the "ESOP"); and (iv) Summit Bank's and
Service Bancorp's employees, officers, directors and trustees.
7. Q. How many shares of stock are being offered?
A. Service Bancorp, Inc. is offering 900,000 shares of common stock at a
price of $10.00 per share. The number of shares may be reduced to as low
as 765,000 or increased to as much as 1,035,000 in response to the
independent appraiser's final
<PAGE>
determination of the consolidated pro forma market value of Summit Bank
and Summit Bancorp, Inc. at closing. Under certain circumstances, to
reflect changes in market and financial conditions after the beginning of
the Offering, the number of shares may be increased to up to 1,190,250
shares.
8. Q. How was it determined that between 765,000 shares and 1,035,000 shares of
stock would be issued at $10.00 per share?
A. The price range was determined through an appraisal of Summit Bank by RP
Financial, LC, an independent appraisal firm specializing in the thrift
industry.
9. Q. How much stock do the directors and executive officers of Summit Bank
intend to purchase through the Subscription Offering?
A. Directors, Trustees and executive officers and their associates intend to
purchase $739,500 (8.2% at the 900,000 share midpoint of the offering) of
the stock to be offered in the Conversion and Reorganization. The purchase
price paid by these individuals will be the same as that paid by customers
and the general public.
10. Q. Will there be any dividends paid on the stock?
A. The Board of Directors of the stock company currently does not intend to
pay cash dividends on its common stock.
BECOMING A STOCKHOLDER
11. Q. How do I subscribe for shares of stock?
A. Eligible customers wishing to subscribe for Service Bancorp, Inc. common
stock must complete a Stock Order Form and return it to the Bank along
with full payment or appropriate instructions authorizing a withdrawal
from a deposit account at Summit Bank on or prior to the close of the
Subscription Offering which is 12:00 noon, Massachusetts time on
September __, 1998. If shares remain available for sale after the
expiration of the Subscription Offering, they will be offered in the
Community Offering, which will begin as soon as practicable after the
end of the Subscription Offering. Members of the public who wish to
order stock directly from the Bank in the Community Offering should
return their Stock Order Form and accompanying payment to Summit Bank as
soon as possible after the Community Offering begins because it may
terminate at any time after it begins. Members of the general public
should contact the Stock Information Center at (508)_________ for
additional information.
12. Q. How can I pay for the shares?
A. First, you may pay for your stock by cash, check, bank draft, negotiable
order of withdrawal or money order. These funds will earn interest at
the Bank's passbook
<PAGE>
rate from the day we receive them until the completion or termination of
the offering. Stock orders accompanied by cash must be delivered in
person to the Bank's office.
Second, you may authorize us to withdraw funds from your Summit Bank
savings account or certificate of deposit without early withdrawal
penalty. These funds will continue to earn interest at the rate in
effect for your account until completion of the offering at which time
your funds will be withdrawn for your purchase. Funds remaining in this
account (if any) will continue to earn interest at the contractual rate
unless the withdrawal reduces the account balance below the applicable
minimum in which case you will receive interest at the passbook rate. A
hold will be placed on your account for the purchase amount you specify
on the stock order form. You will not have access to these funds from
the day we receive your order until the completion or termination of the
offering.
13. Q. How much stock can I buy during the offering period?
A. The minimum number of shares that may be purchased is 25 shares. No
Stock Order Form will be accepted for less than $250. No person or group
of persons acting in concert may purchase more than $100,000 worth of
Common Stock
14. Q. When must I place my order for shares of stock?
A. To exercise subscription rights in the Subscription Offering, a Stock
Order Form must be received with full payment for all shares subscribed
for not later than 12:00 noon, Massachusetts time on September __, 1998.
15. Q. Will I receive interest on funds I submit for stock purchases?
A. Yes. Summit Bank will pay its current passbook rate from the date funds
are received (with a completed Stock Order Form) during the Subscription
Offering until completion or termination of the Conversion and
Reorganization.
16. Q. Can I purchase stock using funds in an IRA account?
A. Yes. To use such funds to subscribe for stock, you need to establish a
self-directed IRA with an outside trustee. When properly executed, there
will be no early withdrawal or tax consequences associated with this
transaction. Contact the Stock Information Center for further
information at (508) _________. It takes several days to process the
necessary IRA forms and therefore it is necessary that your response be
received by ________, 1998 to accommodate your interest.
17. Q. Must I pay a commission on the stock for which I subscribe?
A. You will not pay a commission on stock purchased in the Subscription
Offering. Conversion and Reorganization expenses, including commissions,
will be deducted
<PAGE>
from the proceeds of the offering upon completion of the Conversion and
Reorganization.
18. Q. Will the FDIC (Federal Deposit Insurance Corporation) insure the shares
of stock?
A. No. The shares are not and may not be insured by the FDIC. However, the
FDIC will continue to insure savings accounts and certificates of
deposit at Summit Bank up to the applicable limits allowed by law.
19. Q. If I buy stock in the Offering, how would I go about buying additional
shares or selling shares in the aftermarket?
A. Service Bancorp, Inc. has received conditional approval to have the
Common Stock quoted on the Nasdaq Smallcap Market under the symbol
"____." Therefore, once the stock has commenced trading, interested
investors may contact any broker to buy or sell shares.
20. Q. Are the subscription rights transferable to another party?
A. No. Pursuant to state regulations, subscription rights granted in the
Subscription Offering may be exercised only by the person(s) to whom
they are granted. Any person found to be transferring subscription
rights will be subject to forfeiture of such rights.
21. Q. May I obtain a loan from Summit Bank using stock as collateral to pay for
my shares?
A. No. State regulations do not allow Summit Bank to make loans for this
purpose, but other financial institutions could make a loan for this
purpose.
22. Q. I closed my account several months ago. Someone told me that I am still
eligible to buy stock. Is that true?
A. If you were an account holder on March 31, 1997, or June 30, 1998, you
are entitled to subscribe for stock without regard to whether you
continue to hold your Summit Bank account.
23. Q. If I have misplaced my Stock Order Form what should I do?
A. Summit Bank will mail you another order form or you may obtain one from
any of our offices. If you need assistance in obtaining or completing a
Stock Order Form, a Summit Bank employee will be happy to help you.
<PAGE>
24. Q. How can I get further information concerning the stock offering?
A. You may call the Stock Information Center, at (508)________ for further
information or for a copy of any of the offering information.
THE STOCK IS NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
<PAGE>
IV. Officer and Director Brochure
A. Explanation
An Officer and Director Brochure merely highlights in brochure form the
purchase commitments shown in the Prospectus.
B. Quantity
An Officer and Director brochure is proposed to be sent out in the
initial mailing to all eligible depositors of the Bank along with the
Prospectus. Alternatively, the information contained in this brochure
may be combined with the Question and Answer brochure.
<PAGE>
DIRECTOR AND EXECUTIVE OFFICER
INTENDED PURCHASES
<TABLE>
<CAPTION>
Number of Percent
Name Aggregate Purchase Price Shares at Midpoint
---- ------------------------ ------ -----------
<S> <C> <C> <C>
Eugene G. Stone
Warren W. Chase, Jr.
Michael A. Dalrymple
Pamela J. Mozynski
John J. Morgan
Daniel g. Trambley
James W. Murphy
Kelly A. Adler
Harold W. Bemis
William L. Casey
Paul J. DeSimone
John G. Dugan
Richard Giusti
John Hasenjaeger
Robert J. Heavey
Thomas R. Howie
Kenneth C. A. Isaacs
Paul V. Kenney
Eugene R. Liscombe
Eugene A. Matson
Lawrence E. Novick
All directors and
executive officers of
the Bank as a
group (21) persons)
</TABLE>
<PAGE>
V. IRA Mailing (Optional)
A. Explanation
A special IRA mailing is proposed to be sent to all IRA customers of
the Bank in order to alert the customers that funds held in an IRA can
be used to purchase stock. Since this transaction is not as simple as
designating funds from a certificate of deposit like a normal stock
purchase, this letter informs the customer that this process is
slightly more detailed and involves a personal visit to the Bank.
B. Quantity
One IRA letter is proposed to be mailed to each IRA customer of the
Bank. These letters would be mailed following regulatory approval of
the Conversion and Reorganization and after each customer or
stockholder has received the initial mailing containing a Prospectus.
C. Example - See following page.
<PAGE>
Summit Bank Letterhead
________, 1998
Dear Individual Retirement Account Participant:
As you know, Summit Bank (the "Bank") is in the process of offering
stock in connection with the Bank's reorganization into a "two-tier" mutual
holding company structure. Through the Conversion and Reorganization, certain
current and former customers have a priority right to purchase shares of common
stock of Summit Bancorp, Inc. (the "Company") in a Subscription Offering. The
Company currently is offering up to 1,035,000 shares, subject to adjustment, of
the Company at a price of $10.00 per share.
As the holder of an individual retirement account ("IRA") at the Bank,
you have an opportunity to become a stockholder in the Company using some or all
of the funds being held in your IRA. If you desire to purchase shares of common
stock of the Company through your IRA, the Bank can assist you in self-directing
those funds. This process can be done without an early withdrawal penalty and
generally without a negative tax consequence to your retirement account.
If you are interested in receiving more information on self-directing
your IRA, please contact our Stock Information Center at (508) ____________.
Because it may take several days to process the necessary IRA forms, a response
is requested (but not required) by _______, 1998 to accommodate your interest.
Sincerely,
Eugene G. Stone
President and Chief Executive Officer
This letter is neither an offer to sell nor a solicitation of an offer to buy
Summit Bancorp, Inc. Common Stock. The offer is made only by the Prospectus,
which was recently mailed to you. The shares of Summit Bancorp, Inc. Common
Stock are not deposits and will not be insured by the Federal Deposit Insurance
Corporation or any other governmental agency.
<PAGE>
VI. Counter Cards and Lobby Posters
A. Explanation
Counter cards and lobby posters serve two purposes: (1) As a notice to
the Bank's customers and members of the local community that the stock
sale is underway and (2) to remind customers and members of the local
community of the end of the Subscription and Community Offerings.
B. Quantity
Approximately 2 - 3 Counter cards may be used in each branch location.
Approximately 1 - 2 Lobby posters may be used at each branch office.
C. Example
<PAGE>
C. POSTER
OR
COUNTER CARD
Service Bancorp, Inc.
Holding Company for
Summit Bank
"STOCK OFFERING MATERIALS
AVAILABLE HERE"
Subscription Offering Ends
_______, 1998
<PAGE>
VII. Invitations
A. Explanation
In order to educate customers and the public about the stock offering,
the Bank may hold several Community Meetings in various locations. In
an effort to target a group of interested investors Trident will
request that each Director and Officer of the Bank submit a list of
prospective investors that he/she would like to invite to a Community
Meeting.
Prospectuses are given to each prospect at the Community meeting.
B. Quantity and Method of Distribution
An invitation is mailed to each prospect.
<PAGE>
The Trustees, Officers & Employees
of
Service Bank
cordially invite you
to attend a brief presentation
regarding the stock offering of
Summit Bancorp, Inc.
Please join us at
Place
Address
on
Date
at Time
for hors d'oeuvres
R.S.V.P.
(508) _________________
SERVICE BANCORP, INC.
NUMBER OF SHARES
Fill in the number of shares you wish to purchase and the total amount due. No
fractional shares will be issued. The minimum purchase is _____ shares.
METHOD OF PAYMENT
Check the appropriate box(es). You may pay by check, bank draft or money order
and/or authorize withdrawal from your Summit Bank savings or certificate
account(s). If paying by certified or teller's check, please make it payable to
Summit Bank. Your funds will earn interest at the Bank's certificate rate per
annum until the offering is completed. If paying by withdrawal, please list the
appropriate account number(s); these designated funds will continue to earn
interest from a savings or certificate account at the same account rate and
cannot be withdrawn by you until the offering is completed or terminated.
STOCK REGISTRATION
Print the name(s) in which you want the stock registered. See the reverse side
of this form for registration guidelines.
Enter the social security number (or tax I.D. number) of the registered owner.
Only one number is required.
Indicate the manner in which you wish to take ownership by checking the
appropriate box. If necessary, check other and note ownership such as
corporation, estate or trust. If stock is purchased for a trust, the date of the
trust agreement and trust title must be included.
NASD AFFILIATION
Please refer to the National Association of Securities Dealers, Inc. (NASD)
affiliation section and check the box if applicable. Under the guidelines of the
NASD, members of the NASD and their associates are subject to certain
restrictions on the transfer of securities purchased in accordance with
subscription rights and to certain reporting requirements upon the purchase of
such securities, as established by the NASD.
_____ Check here and initial below if you are a member of the NASD or a person
associated with an NASD member or a member of the immediate family of any such
person to whose support such person contributes directly or indirectly or if you
have an account in which an NASD member or person associated with an NASD member
has a beneficial interest. I agree (i) not to sell, transfer or hypothecate the
stock for a period of 90 days following issuance, and (ii) to report this
purchase order in writing to the applicable NASD member I am associated with
within one day of the payment for the stock. (Initials)_________
ACKNOWLEDGMENT
Sign and date the form. When purchasing as a custodian, corporate officer, etc.,
add your full title to your signature. An additional signature is required only
when payment is by withdrawal from an account that requires more than one
signature to withdraw funds.
DEADLINE
This form along with the Form of Acknowledgment, properly executed and with the
correct payments must be received by 12:00 noon, Massachusetts Time, on
September___, 1998 and will be deemed received upon the date and the time of
delivery of the form to our office. Please submit your order using the enclosed
postage-paid envelope or hand-delivering to Summit Bank.
TELEPHONE INFORMATION
Please enter both a daytime and evening telephone number where you may be
reached in the event we cannot execute your order as given.
Daytime Phone ( ) ____________________
Evening Phone ( ) ____________________
<PAGE>
STOCK ORDER FORM
Number of Shares Offering Price Total Amount Due
______________ X $ 10.00 =_______________
---------------------
_____ Enclosed is a certified teller's check, bank draft, or money order
payable to Summit Bank for $________.
_____ I authorize withdrawal from the following Summit Bank account(s):
Account Number(s) Amount
$
$
Total Withdrawal $
_________________________________________________________________
Name(s) in which your stock is to be registered
_________________________________________________________________
Name(s) in which your stock is to be registered
_________________________________________________________________
Address
_________________________________________________________________
City County
_________________________________________________________________
State Zip Code
_________________________________________________________________
Social Security # or Tax ID #
_______ Individual _______ Joint Tenants _______ Tenants in Common
_______ Uniform Gift or Transfer to Minors
_______ Other _____________________________________________
I (we) acknowledge receipt of the Prospectus and the terms and conditions
described therein. I (we) understand that, after receipt by Summit Bank, this
order may not be modified or withdrawn without the consent of Summit Bank.
Further, I (we) certify that my (our) purchase does not conflict with the
purchase limitations in the Plan of Reorganization, and that the shares being
purchased are for my (our) account only and that there is no present agreement
or understanding regarding any subsequent sale or transfer of such shares. Under
penalties of perjury, I (we) certify that: (1) the Social Security number or
Taxpayer Identification number given above is correct; and (2) I am not subject
to backup withholding. Instructions: You must cross out #2 above if you have
been notified by the Internal Revenue Service that you are subject to
withholding because of under-reporting interest or dividends on your tax return.
I ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED AND IS NOT GUARANTEED BY SUMMIT BANK OR ANY FEDERAL OR STATE
GOVERNMENT OR AGENCY.
If anyone asserts that this security is federally insured or guaranteed, or is
as safe as an insured deposit, I should call Thomas J. Curry, Commissioner of
the Commonwealth of Massachusetts Office of the Commissioner of Banks at (617)
727-0607.
I further certify that, before purchasing the Common Stock of Service Bancorp,
Inc., I received a Prospectus. The Prospectus that I received contains
disclosure concerning the nature of the security being offered and describes the
risks involved in the investment. See the "Risk Factors" section of the
Prospectus. In executing this Stock Order Form I affirm that I have read the
Prospectus and am aware of the risks associated with investing in Service
Bancorp, Inc. Common Stock.
____________________________________________________________________________
Signature Date
____________________________________________________________________________
Additional Signature (if required) Date
For assistance, please call the Stock Information
Center, Summit Bank, at (508) ___-_______ from 9:00 a.m. to
5:00 p.m., Massachusetts Time, Monday through Friday.
<PAGE>
GUIDELINES FOR REGISTERING STOCK
For reasons of clarity and standardization, the stock transfer industry
has developed uniform stock ownership registration which we will use in issuing
your stock certificate. Common ownership registrations are explained below. If
you have any questions about how your Service Bancorp, Inc. common stock should
be registered, see your legal advisor.
To ensure correct registration, please follow the instructions for the
ownership you select.
- --------------------------------------------------------------------------------
GENERAL INSTRUCTION: o Include the first name, middle initial, and
last name of each person listed. Avoid the
use of an initial in place of the first
name.
o Do not use titles such as Mr., Mrs., Dr.,
etc.
o Omit words that do not affect ownership
rights such as special account, personal
property, etc.
- --------------------------------------------------------------------------------
INDIVIDUAL: Instructions: Print the first name, middle initial,
and last name of the person in whose name the stock
is to be registered. You may not list beneficiaries
for this ownership.
- --------------------------------------------------------------------------------
JOINT TENANTS: Joint Tenancy with Right of Survivorship identifies
two or more persons as owners of the stock. Upon the
death of one of the owners, ownership automatically
passes to the surviving tenant(s). Instructions:
Print the first name, middle initial, and last name
of each co-tenant. You may not list beneficiaries for
this ownership.
- --------------------------------------------------------------------------------
UNIFORM GIFTS TO For residents of certain states, stock may be held in
MINORS/UNIFORM the name of a custodian for the benefit of a minor
TRANSFERS TO under the Uniform Transfers to Minors Act. For
MINORS: residents of most other states, stock may be held in
a similar type of ownership under the Uniform Gifts
to Minors Act of the individual states. For either
ownership, the minor is the actual owner of the stock
with the adult custodian being responsible for the
investment until the minor reaches legal age.
Instructions: See your legal advisor if you are
unsure about the correct registration of your stock.
On the first NAME line, print the first name, middle
initial, and last name of the custodian, with the
abbreviation CUST after the name
Print the first name, middle initial, and last name
of the minor on the second NAME line. Only one
custodian and one minor may be designated.
Please indicate the minor's social security number in
the signature block.
- --------------------------------------------------------------------------------
OTHER: Generally, fiduciary relationships (such as
Conservatorship, Legal Trust, Guardianship, etc.) are
established under a form of trust agreement or are
pursuant to a court order. Without a legal document
establishing a fiduciary relationship, your stock may
not be registered in a fiduciary capacity.
Instructions: On the first NAME line, print the first
name, middle initial, and last name of the fiduciary
if the fiduciary is an individual. If the fiduciary
is a corporation, list the corporate title on the
first NAME line. Following the name, print the
fiduciary title such as conservator, personal
representative, etc.
On the second NAME line, print either the name of the
maker, donor or testator OR the name of the
beneficiary. Following the name, indicate the date
and type of legal document establishing the fiduciary
relationship (agreement, court order, etc.) (Use the
space marked OTHER if necessary). Please contact us
if you have any questions. EXAMPLE OF A FIDUCIARY
REGISTRATION: John D. Smith Trustee for Tom A. Smith
Under Agreement Dated 06/09/74. PLEASE NOTE THAT
TOTTEN TRUST AND PAYABLE ON DEATH OWNERSHIPS MAY NOT
BE USED IN REGISTERING STOCK. For example, stock
cannot be registered as John Doe Trustee for Jane Doe
or John Doe Payable on Death to Jane Doe.
- --------------------------------------------------------------------------------
NASD AFFILIATION: Please refer to the NASD AFFILIATION
statement on the face of this form. If applicable,
initial where indicated and check the box. the
National Association of Securities Dealers, Inc.
Interpretation With Respect to Free-Riding and
Withholding (the Interpretation) restricts the sale
of a hot issue (securities that trade at a premium in
the aftermarket) to NASD members, persons associated
with NASD members (i.e., an owner, director, officer,
partner, employee or agent of a NASD member) and
certain members of their families. Such persons are
required to indicate that they will comply with
certain conditions required for an exemption from the
restrictions.
- --------------------------------------------------------------------------------
<PAGE>
CERTIFICATION FORM
(This Signed Form Must Accompany A Signed Stock Order Form)
I ACKNOWLEDGE THAT THE SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE
("COMMON STOCK"), OF SERVICE BANCORP. (THE "CORPORATION"), THE PROPOSED HOLDING
COMPANY FOR SUMMIT BANK (THE "BANK"), ARE NOT GUARANTEED BY THE CORPORATION, THE
BANK OR THE FEDERAL GOVERNMENT.
If anyone asserts that this security is federally insured or
guaranteed, or is as safe as an insured deposit, I should call Thomas J. Curry,
Commissioner of the Commonwealth of Massachusetts Office of the Commissioner of
Banks at (617) 727-0607.
I further certify that, before purchasing the shares of Common Stock of
the Corporation, I received a copy of the Prospectus dated August ___, 1998
which discloses the nature of the shares of Common Stock being offered thereby,
and describes the following risks involved in an investment in the Common Stock
under the heading "Risk Factors" beginning on page ___ of the Prospectus:
1. Growth of the Bank's Commercial Business and Commercial Real
Estate Lending
2. Mutual Company Control of Stock Company and Other
Anti-Takeover Provisions
3. Uncertainty as to Future Growth Opportunities
4. Sensitivity to Changes in Interest Rates
5. Geographic Concentration of Loans
6. Potential Increased Compensation Expenses after the
Reorganization and Offering
7. Financial Benefits to Officers and Directors
8. Possible Dilutive Effect of Issuance of Additional Shares
9. Strong Competition Within the Bank's Market Area
10. Regulatory Oversight and Legislation
11. Absence of Market for Common Stock
12. Possible Increase in Estimated Valuation Range and Number of
Shares Issued
13. Role of the Financial Advisor/Best Efforts Offering
14. Conversion of Mutual Company to Stock Form
15. Conditions to Closing of the Offering
16. Dependence on Key Personnel
17. Technology Risks and Year 2000 Problem
For a more detailed description of the risks involved in the offering,
see "Risk Factors" at pages ___ through ___ of the Prospectus.
Signature: ____________________________________________________
Signature: ____________________________________________________
(Note: If stock is to be held jointly, both parties must sign)
Date: ______________________
